The key competitive advantage for the high-flying FANG technology stocks is their focus on, and excellence at, personalizing services for their customers. That's the opinion of Michael Lippert, a portfolio manager at Baron Capital Inc., in a column for Barron's. "Strength begets strength and scale begets scale," he writes, expecting that these four companies will continuously enhance personalization, thereby increasing their dominance.

The massive combined market capitalization of the FANG stocks is just one indicator of this dominance. It was $1.7 trillion as of Friday's close: Facebook Inc. (FB), $505 billion; Inc. (AMZN), $488 billion; Netflix Inc. (NFLX), $82 billion; and Google parent Alphabet Inc. (GOOGL), $661 billion.

These stocks also have turned in impressive, sometimes eye-popping, share price gains over the past 12 months and five years, through Friday: Facebook, 34% and 698%; Amazon, 28% and 282%; Netflix, 87% and 2,139%; and Alphabet, 17% and 166%. By comparison, the S&P Index (SPX) is up by 17% and 71%, respectively, over these same two periods. (For more, see also: FANG Stocks' Downside Risk Jumps as Tech Bets Rise.)

How FANGs Personalize

Facebook, Lippert notes, tracks your engagement with its site, allowing it to tailor the content and ads in your news feed to reflect your interests. Amazon deduces the sorts of products that you are most likely to buy, based on your prior purchases and browsing behavior, then displays these prominently when you visit the site. Similarly, Netflix tracks everything you watch, then offers up new recommendations based on your past viewing habits.

Google's search algorithm keeps tabs on your prior searches, and adjusts future search results accordingly, attempting to increase the odds of their delivering what you want to find. Google's ad generation mechanism, meanwhile, also takes account of your past browsing behavior in hopes of serving up the sorts of ads that are most likely to gain your attention, if not your purchases. That personalization adds value for advertisers as well as consumers.

Amazon's Prime membership is a loyalty program designed to promote yet more purchases. Lippert also cites a prediction from Scott Galloway, a professor of marketing at the NYU Stern School of Business. Galloway believes that Amazon is becoming so confident in its ability to predict individual consumer preferences, that one day in the not-so-distant future it might just start sending customers products that it thinks they will want. Critics might counter that many, if not most, customers would not appreciate having to return unwanted, unrequested items. (For related reading, see: FANG Stocks Will Continue to Lead Market Higher.)

Virtuous Circle

Lippert observes that the FANGs are in a virtuous circle, wherein more users and usage generate more behavioral data, which is analyzed by these companies to improve their services. These service improvements, in turn, spur yet more growth for these companies. On the other hand, this level of customer surveillance raises valid privacy concerns. Whether the FANG companies' collection, analysis and utilization of big data in support of personalization is seen as a benign boon to consumers, or as a threatening, intrusive Big Brother invasion of privacy, depends on one's point of view.