For a lot of investors, when you bring up the term “FAANG,” they understand what you are referring to, as the term has become quite ubiquitous. The term FAANG refers to the stocks of:
Facebook (Meta)
Apple
Amazon
Netflix
Google
It can be argued that these five companies have changed the way we work, live, and communicate. They have changed our lives in so many ways…and along the way investors have done quite well (mostly).
But like most things, it depends how we measure returns, or more accurately how long has an investor has owned these companies.
Investors get dramatically different answers to the question, “How well are these companies doing?” depending on the time period they are measuring.
Let’s review how well they’ve done over the following time periods:
- 5-days
- 3-months
- 1-year
- 3-years
- 5-years
- 10-years
Short answer is, they are Up, Down, Down, Up, Up, and Way Up.
5-Day Return: UP
3-Month Return: DOWN
1-Year Return: DOWN
3-Year Return: UP
5-Year Return: UP
10-Year Return: WAY UP
Investors have been handsomely compensated over the last 10-years, gaining more than 10x their original investment.
And during the last several years the P/E Ratio (a valuation metric) has been coming down on these companies collectively (chart below). This is good news for investors.
New investors are now able to buy these companies at valuation levels never seen before.
What’s interesting is that many other companies and their corresponding stock have similar patterns, over the short-term they tend to be up and down quite a bit.
The next time you hear the old adage, “What goes up, must come down.” You can ask them, “Over what time period?“
-Paul R. Rossi, CFA