Last week, we discussed the prospects of Netflix and Amazon among others. Netflix and Amazon are just two of the group of four companies known as the FANG – Facebook, Amazon, Netflix and Google. In this report, we will take a look at Facebook and Google.
Google has universally established itself as the “goto” search engine. Competitors who once ruled the day – namely Yahoo, which is trying in vain to get itself sold to Verizon and Bing, Microsoft’s search engine, which is all but dead, have given up on competing with Google. Its reach is so persuasive that Googling has now become a verb frequently used in common parlance. With its initiatives in the mobile platform as well as what the company fondly calls “moon shots” – self driving cars, smart home, wearables, drones etc., we could expect Google to continue to push the boundaries of technology and maintain its dominance for the foreseeable future.
Facebook has done in a handful of years what many have not achieved in decades – connecting over a billion people on one common platform. And in the process, the company also figured out how to monetize its efforts in the mobile platform – something rare in businesses these days. While some of us older folks could dig into our attic to find handwritten letters shipped via regular mail from our parents and friends from years ago, it is highly unlikely that the younger generation who primarily use smartphones as the preferred method of communication may even write more than a few sentences even as they get older. In the process, Facebook has changed the landscape of communication by enabling instant communication of ideas to a group of people rather than the traditional method of one to one communication. We could expect this concept to flourish and improve in the future.
Future Wealth View
The one common thread that connects all the companies in the FANG group is visionary management. Every single one of the CEO/Founders of the FANG company is always asking themselves – “What’s next? What needs remain unfulfilled? How can my company address that space?”. These are hallmarks of great leaders. At Future Wealth, every one of our clients who fall under the “Aggressive Growth” or “Growth” risk profile, own one or more of the FANG stocks as a core holding for the long term. Near term stock movements, valuation metrics etc. have little meaning when looking at this category of stocks. We expect the FANG group to form an integral part of our client portfolios for years to come. A quick look at the year to date return from this group versus the S&P and Dow.
Facebook – 25.99%, Amazon – 15.12%, Netflix – 10.77%, Google – 5.53%
Dow Jones – 4%, S&P Index – 3.9%