What Are FANG Stocks?

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In finance, the acronym "FANG" refers to the stocks of four prominent American technology companies: Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). 

In 2017, the company Apple (AAPL) was also added, causing the acronym to be rewritten as "FAANG."

FANG stocks are famous for the impressive growth they have shown in recent years, with each member more than doubling over the past five years.

***Understanding FANG Stocks

The term FANG Stocks was coined by CNBC's "Mad Money" host Jim Cramer in 2013.1

It is now widely used by market commentators and analysts. 

The stocks referred to by the acronym are all well-known and richly-valued technology companies that trade on the NASDAQ exchange, a collection of approximately 3,300 American technology companies.

Many other companies included in the NASDAQ exchange are also viewed as growth investments, although very few have matched the impressive growth of the FANG stocks in recent years.

Despite their common reputation as successful growth companies, the business models of the FANG stocks are distinct. 

Facebook, for example, is the world’s preeminent social networking platform. With a user-base of more than 2.5 billion people as of Aug. 2020, the company can claim approximately 30% of the world's population as its customers.

To monetize this extraordinary user base, Facebook sells ads that are targeted based on users’ personal preferences and usage patterns.

Amazon, meanwhile, is a leading business to consumer (B2C) e-commerce platform that uses leading-edge cloud computing and data analytics technologies to sell a retail catalog.

 Although Amazon initially pioneered the sale of books online, books now represent only about one-third of their overall product catalog. 

In 2020, the company had sold products to over 300 million active customers in the U.S. alone, with half of those customers opting to subscribe to its paid membership service, Amazon Prime.

Netflix is also known for its impressive customer growth. 

An online entertainment streaming service specializing in movies and television shows, the company's subscriber base has grown exponentially in recent years, from 22 million in 2011 to more than 190 million in 2020.

To compete with new entrants to the streaming market, Netflix has also begun aggressively producing its own exclusive content, moving beyond its traditional role as a content aggregator to a major content producer in its own right.

Alphabet has leveraged its core expertise as the world’s foremost search engine, developing a highly profitable online advertising business while driving user retention through popular web applications such as YouTube, Google Docs, and Google Maps. 

The company receives an average of over 60,000 search requests every second of every day, and its mobile operating system, Android, has gained an estimated 75% share of the global smartphone market.

***What is a Free Market?

The free market is an economic system based on supply and demand with little or no government control. 

It is a summary description of all voluntary exchanges that take place in a given economic environment. 

Free markets are characterized by a spontaneous and decentralized order of arrangements through which individuals make economic decisions. 

Based on its political and legal rules, a country's free market economy may range between very large or entirely black market.

***What Is a Free Trade Agreement (FTA)?

A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them. 

Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

The concept of free trade is the opposite of trade protectionism or economic isolationism.

***What Is Gross Income?

Gross income for an individual—also known as gross pay when it's on a paycheck—is the individual’s total pay from his or her employer before taxes or other deductions. 

This includes income from all sources and is not limited to income received in cash; it also includes property or services received. 

Gross annual income is the amount of money a person earns in one year before taxes and includes income from all sources.

For companies, gross income is interchangeable with gross margin or gross profit. 

A company’s gross income, found on the income statement, is the revenue from all sources minus the firm’s cost of goods sold (COGS). 

***What Is Gross Margin?

Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). 

In other words, it is the sales revenue a company retains after incurring the direct costs associated with producing the goods it sells, and the services it provides. 

The higher the gross margin, the more capital a company retains on each dollar of sales, which it can then use to pay other costs or satisfy debt obligations. 

The net sales figure is simply gross revenue, less the returns, allowances, and discounts.

The Formula for Gross Margin Is

​  

Gross Margin=Net Sales−COGS

where:

Net Sales=Equivalent to revenue, or the total amount

of money generated from sales for the period. 

It can also

be called net sales because it can include discounts

and deductions from returned merchandise.

Revenue is typically called the top line because it sits

on top of the income statement. 

Costs are subtracted

from revenue to calculate net income or the bottom line.

COGS=Cost of goods sold. 

The direct costs associated with producing goods. Includes both direct

labor costs, and any costs of materials used in producing

or manufacturing a company’s products.

***What Is Gross Profit?

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. 

Gross profit will appear on a company's income statement and can be calculated by subtracting the cost of goods sold (COGS) from revenue (sales). 

These figures can be found on a company's income statement. Gross profit may also be referred to as sales profit or gross income.

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