FANG is an acronym for four companies: Facebook (now named Meta Platforms, Inc.) (FB), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX), and Alphabet Inc. (GOOGL). These companies represent a variety of different sectors, ranging from communication services to technology to consumer discretionary, but are often grouped together because they historically have been among the fastest-growing, most innovative, and most successful large companies in the world.
For investors seeking exposure to the FANG group without having to concentrate a portfolio in a few volatile stocks, a FANG-themed exchange-traded fund (ETF) might represent the best option. These four companies have attracted intense interest from investors because technology has driven their growth in areas such as e-commerce, mobile devices, cloud computing, and streaming entertainment.
- FANG stocks, as represented by the technology, communication services, and consumer discretionary sectors, had a mixed performance relative to the broader market during the past year.
- The FANG-themed exchange-traded funds (ETFs) with the best one-year trailing total returns are XLG, SPYG, and VOOG.
- Apple Inc. is the top holding for all three ETFs.
Despite its popularity and wide use among investors, the acronym FANG may be a bit out of date because Google has since renamed itself Alphabet and Facebook has renamed itself Meta. Several variations have also emerged. Apple Inc. (AAPL) is often added to create a five-stock group known by the term FAANG. And some investors and analysts have even added Microsoft Corp. (MSFT) to make a six-stock group called FAAMNG, or the FAAMNGs. For simplicity, we’ll use the original FANG acronym in this story.
The sectors for each of these companies provide a rough benchmark for comparison to the broader U.S. market while illustrating their divergent characteristics. Facebook (Meta), Netflix, and Google (Alphabet) are in the communication services sector. That sector has posted a 15.5% one-year trailing total return, as measured by the performance of the S&P 500 Communication Services sector index. Amazon, on the other hand, is in the consumer discretionary sector, which has a one-year trailing total return of 11.9%, based on the S&P 500 Consumer Discretionary sector index. Meanwhile, Apple and Microsoft are in the tech sector, which has posted a one-year trailing total return of 26.4%, as measured by the S&P 500 Information Technology sector index.
The consumer discretionary and communication services sectors have underperformed the S&P 500’s one-year trailing total return of 23.3%, while the information technology (IT) sector has outperformed, as of Jan. 31, 2022.
There are 21 FANG stock ETFs that trade in the United States, excluding leveraged and inverse funds, as well as those with less than $50 million in assets under management (AUM). These funds offer good exposure to the four FANG companies as well as other stocks. The best-performing FANG stock ETF, based on performance over the past year, is the Invesco S&P 500 Top 50 ETF (XLG). We examine the three best FANG stock ETFs below. All numbers below are as of Feb. 5, 2022.
- Performance Over One-Year: 19.4%
- Expense Ratio: 0.20%
- Annual Dividend Yield: 1.0%
- Three-Month Average Daily Volume: 81,155
- Assets Under Management: $2.5 billion
- Inception Date: May 4, 2005
- Issuer: Invesco
XLG tracks the S&P 500 Top 50 Index, which is composed of the 50 largest securities in the S&P 500 Index by market capitalization. Many of the mega-cap stocks in this fund may not experience tremendous growth, but the ETF is heavily tilted toward fast-growth companies. It's important to note that the ETF holds five of the six stocks in the FAAMNG group mentioned above, and they account for nearly 39% of the portfolio. Overall, about 54.4% of XLG's holdings are in the information technology and communication services sectors, followed by consumer discretionary, health care, financials, and other sectors.
The top holdings of XLG include Apple Inc. (AAPL), a technology company specializing in personal computing and mobile devices, as well as services; Microsoft Corp. (MSFT), a tech company that develops devices, software, related services, and solutions; and Amazon.com, Inc. (AMZN), an e-commerce, cloud computing, and digital streaming provider.
- Performance Over One-Year: 15.2%
- Expense Ratio: 0.04%
- Annual Dividend Yield: 0.65%
- Three-Month Average Daily Volume: 3,248,884
- Assets Under Management: $14.2 billion
- Inception Date: Sept. 25, 2000
- Issuer: State Street
SPYG tracks the S&P 500 Growth Index, which includes large-cap stocks that demonstrate the strongest growth potential based on sales growth, earnings growth relative to price, and momentum. SPYG is one of the lowest-cost ETFs in the SPDR family. Nearly three-quarters of SPYG's portfolio is allocated to the information technology, consumer discretionary, and communications services sectors. The biggest ten holdings account for 54.4% of assets. The top three holdings of SPYG are Apple, Microsoft, and Amazon.
- Performance Over One-Year: 15.1%
- Expense Ratio: 0.10%
- Annual Dividend Yield: 0.61%
- Three-Month Average Daily Volume: 187,511
- Assets Under Management: $7.6 billion
- Inception Date: Sept. 7, 2010
- Issuer: Vanguard
VOOG also is a large-cap growth fund that targets stocks in the S&P 500 Growth Index. The ETF typically does not purchase securities of any holding if the total exceeds 5% of the fund’s total assets. IT companies make up more than 44% of the fund’s portfolio, consumer discretionaries make up 16.8%, and communication services companies comprise 13.1%. VOOG’s top 10 positions account for just over half of all invested assets, and the vast majority of those 10 stocks are in IT or communications services. The top three holdings of VOOG are Apple, Microsoft, and Amazon.
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