FAANG Stocks
The five FAANG stocks include Facebook, Inc. (NASDAQ: FB), e-commerce behemoth Amazon.com, Inc. (NASDAQ: AMZN), tech giant Apple Inc. (NASDAQ: AAPL), on-demand streaming service provider Netflix, Inc. (NASDAQ: NFLX), and the internet search and cloud computing leader Alphabet Inc. (NASDAQ: GOOGL). Each of these FAANG stocks is a market leader in its respective field. These giant tech companies have generated substantial profits to investors since the market bottomed out following the Great Recession in March 2009.
FAANG growth stocks have soared in recent years, and the sector shows no signs of slowing down even as investors shift to the cyclical industry in response to rising Treasury yields. The NYSE FANG+ index, which covers the five large-cap tech stocks, has outperformed other major US indexes in the last seven years, returning 34.28% annualized total return. This is compared to an increase of only 14.09% for the S&P 500, 23.88% for the S&P 500 Information Technology Index, and 21.86% for the NASDAQ-100.
Recently, tech giants Facebook, Inc. (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL), Alphabet Inc. (NASDAQ: GOOGL), and Microsoft Corporation (NASDAQ: MSFT) all reported quarterly results and recorded group revenue of $332 billion. The rapid adoption of cloud computing and the demand for online advertising drove a 34% increase in the combined income of the world's largest technology companies.
Market analysts remain bullish on FAANG stocks like Facebook, Inc. (NASDAQ: FB). The most prominent social media platform based in California reported a solid second quarter with a revenue of $29.08 billion, an increase of 58% year over year, and beating revenue estimates of $27.89 billion. In the second quarter of 2021, Facebook, Inc. (NASDAQ: FB) reported an adjusted EPS of $3.61, beating estimates of $3.03. Truist analyst Youssef Squali maintained a Buy rating on Facebook, Inc. (NASDAQ: FB) on July 29 and increased the firm's price target to $425 per share from $400, noting the company's AR/VR technologies, as well as video and commerce, as significant growth drivers. The stock has gained 31% year to date, and shares increased 9% in the last three months.
Another notable FAANG stock analysts are watching is California-based tech giant Apple Inc. (NASDAQ: AAPL). The company's revenue in the third quarter came in at $81.4 billion, increasing 36% year on year, exceeding the $73.14 billion predicted by analysts. In July, J.P. Morgan analyst Samik Chatterjee maintained an Overweight rating on Apple Inc. (NASDAQ: AAPL) and increased the firm's price target to $175 per share from the previous $170. The analyst is bullish on Apple Inc., citing sustained Mac sales and strong demand for the iPhone 13. According to Bloomberg, Apple Inc. (NASDAQ: AAPL) has requested manufacturers to produce up to 90 million iPhone 13 handsets by the end of 2021. The stock has gained 6.1% in the previous month.
One of the most consistently successful FAANG stocks is the internet search engine and cloud computing operator Alphabet Inc. (NASDAQ: GOOGL). In its second-quarter report, the California-based tech giant recorded a 62% growth in revenue year over year to $61.8 billion, exceeding analyst expectations of $56.16 billion. In the second quarter of 2021, Alphabet Inc. (NASDAQ: GOOGL) reported an EPS of $27.26, exceeding estimates of $19.34. Shares of Alphabet Inc. (NASDAQ: GOOGL) increased 11% in the previous month.
Investing is becoming difficult by the day, even for smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn't keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey's research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and May 29, 2021, our monthly newsletter's stock picks returned 206.8%, vs. 91.0% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
While core FAANG stocks include only 5 companies, we picked some more tech stocks that offer products and services related to Cloud, software, broader technology and AI. The stocks on our list were picked based on their fundamentals and prospects for growth based on key business characteristics. We also took into account analysts' ratings and hedge fund sentiment to pick out the stocks most popular among the hedge funds tracked by Insider Monkey. These FAANG stocks have been ranked in order of the number of hedge fund holders from the lowest to the highest.
Best FAANG Stocks to Buy Now
10. Tesla, Inc. (NASDAQ: TSLA)
Number of Hedge Fund Holders: 62
We start our list of the 10 best FAANG stocks to buy now with EV maker Tesla, Inc. (NASDAQ: TSLA). The California-based electric vehicle manufacturer sells self-driving cars, solar panels, and battery energy storage.
Tesla, Inc. (NASDAQ: TSLA) saw its stock rise 5.3% after CEO Elon Musk said earlier this week that the company is making a long-term move to lithium-iron-phosphate (LFP) cells. Musk also revealed that AI Day would take place on August 19.
In May, Morgan Stanley maintained an Overweight rating on Tesla, Inc. (NASDAQ: TSLA) and a price target of $900 per share. Tesla, Inc. was raised to a Buy from a Sell by DZ Bank analyst Matthias Volkert on July 29, with a $750 per share price target. The stock has gained 138% in the previous year.
The company has a market cap of $680 billion. In the second quarter of 2021, Tesla, Inc. (NASDAQ: TSLA) reported an EPS of $1.45, beating estimates by $0.47. The company's second-quarter revenue grew 98% year over year to $11.96 billion, beating revenue estimates by $559.3 million. The EV maker delivered 201,250 vehicles and produced 206,421 self-driving cars in the second quarter.
At the end of the first quarter of 2021, 62 hedge funds from our database held stakes in Tesla, Inc. (NASDAQ: TSLA). The total value of these positions amounted to approximately $10.01 billion.
Just like Facebook, Inc. (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL), Netflix, Inc. (NASDAQ: NFLX), and Alphabet Inc. (NASDAQ: GOOGL), Tesla, Inc. (NASDAQ: TSLA) is one of the best FAANG stocks to buy now.
In its Q1 2021 investor letter, Baron Partners Fund mentioned Tesla, Inc. (NASDAQ: TSLA) and shared their insights on the company. Here is what the fund said:
Tesla, Inc. designs, manufactures and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla's fully self-driving technology."
9. NVIDIA Corporation (NASDAQ: NVDA)
Number of Hedge Fund Holders: 80
Adobe Inc. (NASDAQ: ADBE) ranks 8th on the list of 10 best FAANG stocks to buy now. The California-based software company develops multimedia creative tools and solutions. The company was founded in 1982 and was formerly known as Adobe Systems Incorporated.
In June, Mizuho analysts maintained a Buy rating on Adobe Inc. (NASDAQ: ADBE) and increased the firm's price target to $640 per share from the previous $600, citing the strong revenue results of its Digital Media segment, which grew 25% to $2.79 billion. According to Mizuho, Adobe Inc. (NASDAQ: ADBE) is expected to profit from the growing digitalization trend.
On July 28, shares of Adobe Inc. (NASDAQ: ADBE) jumped 3% pre-market after the software company was named Walmart Inc.'s (NYSE: WMT) e-commerce partner, allowing the retailer to integrate Walmart Marketplace, online and in-store shopping, and pick-up technologies with Adobe Commerce.
The company has a market cap of $296 billion. In the second quarter of 2021, Adobe Inc. (NASDAQ: ADBE) reported an EPS of $3.03, beating estimates by $0.22. Shares of Adobe Inc. (NASDAQ: ADBE) increased 5% in the previous month after announcing Q2 solid results. The company's revenue increased 23% year over year to $3.84 billion and beating revenue estimates by $106.5 million.
By the end of the first quarter of 2021, 107 hedge funds followed by Insider Monkey held stakes in Adobe Inc. (NASDAQ: ADBE) with a total value of $12.1 billion, down from 114 hedge funds worth $11.9 billion, respectively, a quarter earlier.
Just like Facebook, Inc. (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL), Netflix, Inc. (NASDAQ: NFLX), and Alphabet Inc. (NASDAQ: GOOGL), Adobe Inc. (NASDAQ: ADBE) is a good technology stock to invest in according to market analysts.
In its Q2 2021 investor letter, Richie Capital Group mentioned Adobe Inc. (NASDAQ: ADBE) and discussed its stance on the firm. Here is what the fund said:
Adobe Systems (ADBE – up 24.8%) – In the last 15 years, Adobe has transformed itself into a software behemoth, more than tripling its revenue since 2010. The company is famous for its namesake PDF reader and photo-editing software Photoshop. However, ADBE sells a full suite of software products through a recurring subscription model. The company transitioned from selling boxed software to recurring subscriptions in 2013 and revenues have grown consistently since. The company achieved $13B in revenue in 2020 with 88% Gross Margins."
7. Twitter, Inc. (NYSE: TWTR)
Number of Hedge Fund Holders: 107
Twitter, Inc. (NYSE: TWTR) ranks 7th on the list of the 10 best FAANG stocks to buy now. The San Francisco-based social networking platform provides global microblogging services. In addition, Twitter, Inc. (NYSE: TWTR) is putting its new Shop Module feature to the test as part of its entry into the online shopping sector. Shares of Twitter, Inc. (NYSE: TWTR) jumped 5% in the last week.
On July 30, BMO Capital analyst Daniel Salmon maintained a Market Perform rating on Twitter, Inc. (NYSE: TWTR) and increased the firm's price target to $70 per share from $65 previously, citing advertising and e-commerce products Twitter, Inc.'s strengths.
The company has a market cap of $56 billion. In the second quarter of 2021, Twitter, Inc. (NYSE: TWTR) recorded a net income of $66 million or diluted EPS of $0.08. The company's second-quarter revenue grew 75% year over year to $1.19 billion, beating revenue estimates by $126.56 million. The stock has gained 29% year to date.
By the end of the first quarter of 2021, 107 hedge funds followed by Insider Monkey held stakes in Twitter, Inc. (NYSE: TWTR) with a total value of $4.53 billion, up from 78 hedge funds having stakes worth $2.77 billion in the previous quarter.
Just like Facebook, Inc. (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL), Netflix, Inc. (NASDAQ: NFLX), and Alphabet Inc. (NASDAQ: GOOGL), Twitter, Inc. (NYSE: TWTR) is a good technology stock to buy according to market analysts.
In its Q2 2021 investor letter, ClearBridge Investments mentioned Twitter, Inc. (NYSE: TWTR) and discussed its stance on the firm. Here is what the fund said:
"Not every portfolio company will neatly fit into one of these four growth segments and some may move from one to another over time. Social media platform Twitter could be considered an improving growth story due to the initiatives put in place to grow and better monetize its user base. With the global return of live events and sports causing a rebound in advertising, combined with other new services beginning to thrive, this is a company with the fundamentals to be categorized as a disruptor."
6. Netflix, Inc. (NASDAQ: NFLX)
Number of Hedge Fund Holders: 110
Netflix, Inc. (NASDAQ: NFLX) ranks 6th on the list of the 10 best FAANG stocks to buy now. The California-based internet company offers a subscription-based video streaming service. Netflix, Inc. (NASDAQ: NFLX) has over 209 million paid subscribers in 190 countries.
On July 21, UBS analyst John Hodulik maintained a Buy rating on Netflix, Inc. (NASDAQ: NFLX) with a price target of $620 per share, highlighting the resiliency of the video streaming company amid COVID-19 setbacks in production.
The company has a market cap of $229 billion. In the second quarter of 2021, Netflix, Inc. (NASDAQ: NFLX) reported an EPS of $2.97, missing the consensus of $3.16. The company's revenue in the second quarter came in at $7.34 billion, increasing 19% year over year and beating revenue estimates by $17.18 million. The stock has gained 6% in the past twelve months. Netflix, Inc. (NASDAQ: NFLX) also earned an additional 1.54 million paid net subscribers in the quarter.
By the end of the first quarter of 2021, 110 hedge funds followed by Insider Monkey held stakes in Netflix, Inc. (NASDAQ: NFLX) with a total value of $14.2 billion.
In its Q1 2021 investor letter, Polen Focus Growth Fund mentioned Netflix, Inc. (NASDAQ: NFLX) and shared their insights on the company. Here is what the fund said:
We purchased Netflix in March, initiating a 3% position in the portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and a deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has the number one market share in 99% of markets globally. However, it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix's growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their "anchor" service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix's earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate."
5. Apple Inc. (NASDAQ: AAPL)
Number of Hedge Fund Holders: 127
Apple Inc. (NASDAQ: AAPL) ranks 5th on the list of the 10 best FAANG stocks to buy now. The California-based tech company manufactures iPhones, iPads, iMacs, and wearables. The company also offers subscription-based music, video, and game streaming services.
Ananda Baruah of Loop Capital maintained a Buy rating on Apple Inc. (NASDAQ: AAPL) on July 29 and increased the firm’s price target to $165 per share from $150, citing Apple’s iPhone products a key driver for the second half of the year. Shares of Apple Inc. (NASDAQ: AAPL) climbed 11% in the past three months.
The company has a market cap of $2.4 trillion. In the third quarter of 2021, Apple Inc. (NASDAQ: AAPL) recorded an EPS of $1.30, beating estimates by $0.29. The company’s third-quarter revenue was $81.43 billion, increasing 36% year over year, beating revenue estimates by $8.09 billion. The stock has gained 37% in the past twelve months.
By the end of the first quarter of 2021, 127 hedge funds out of the 866 tracked by Insider Monkey held stakes in Apple Inc. (NASDAQ: AAPL), worth roughly $130.9 billion.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks, and Apple Inc. (NASDAQ: AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ’20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
4. Alphabet Inc. (NASDAQ: GOOGL)
Number of Hedge Fund Holders: 185
Alphabet Inc. (NASDAQ: GOOGL) ranks 4th on the list of the 10 best FAANG stocks to buy now. The California-based tech giant is Google’s parent company. Alphabet Inc. (NASDAQ: GOOGL) provides online advertising and cloud computing services. The company also operates Google Services, which comprises YouTube, Google Maps, Google Play, Chrome, and Search.
On July 29, Argus Research maintained a Buy rating on Alphabet Inc. (NASDAQ: GOOGL) and increased the firm’s price target to $3,100 per share from the previous $2,800, noting Alphabet Inc.’s strong Q2 results.
Alphabet Inc. (NASDAQ: GOOGL) is among the biggest tech companies that benefit from the continuous demand for cloud computing services due to remote and hybrid work setup. Google Cloud’s revenue in the second quarter grew 54% year over year to $4.63 billion, exceeding analyst consensus of $4.40 billion. Alphabet Inc. (NASDAQ: GOOGL) stock has gained 54% year to date.
The company has a market cap of $1.8 trillion. In the second quarter of 2021, Alphabet Inc. (NASDAQ: GOOGL) reported an EPS of $27.26, exceeding estimates of $19.34. In its second-quarter report, the California-based tech giant recorded a 62% growth in revenue year over year to $61.9 billion, exceeding analyst expectations of $56.16 billion.
By the end of the first quarter of 2021, 185 hedge funds out of the 866 tracked by Insider Monkey held stakes in Alphabet Inc. (NASDAQ: GOOGL), worth roughly $24.6 billion. This is compared to 179 hedge funds in the previous quarter, with stakes worth approximately $21.9 billion.
In its Q2 2021 investor letter, Ensemble Capital mentioned Alphabet Inc. (NASDAQ: GOOG) and discussed its stance on the firm. Here is what the fund said:
“Google: While Google’s stock was up 31% in 2020, handily beating the S&P 500, it was one of the weaker performing Big Five tech giants. With the company posting blow-out reports in the most recent quarters, the stock has soared 40% this year, making it the best performing of the Big Five this year. In the most recent quarter, the stock rallied 18% in the wake of the company reporting its largest beat of estimated earnings before interest and taxes in over a decade. Amazingly, the company is now reporting revenue more than 50% above the level it was generating two years ago, even though travel-related advertising, which is one of Google’s largest advertising categories, has not yet rebounded.”
3. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ: AMZN) ranks 3rd on the list of the 10 best FAANG stocks to buy now. The Seattle-based tech company provides an e-commerce platform, cloud computing services through Amazon Web Services, and video streaming services.
On July 30, Stifel analyst Scott Devitt maintained a Buy rating on Amazon.com, Inc. (NASDAQ: AMZN) with a price target of $4,400 per share. Despite missing revenue estimates in Q2, Scott Devitt advises investors to buy the dip, noting that the setup is enticing now that the stakes are “on the other side of the COVID comp reset.”
The company has a market cap of $1.7 trillion. In the second quarter of 2021, Amazon.com, Inc. (NASDAQ: AMZN) reported an EPS of $15.12, beating estimates by $2.83. The company’s revenue in the second quarter grew 27% year over year to $113.08 billion, missing revenue estimates by $2.01 billion. Shares of Amazon.com, Inc. (NASDAQ: AMZN) increased 5% in the last twelve months.
By the end of the first quarter of 2021, 243 hedge funds followed by Insider Monkey held stakes in Amazon.com, Inc. (NASDAQ: AMZN) with a total value of $50.4 billion.
2. Microsoft Corporation (NASDAQ: MSFT)
Number of Hedge Fund Holders: 251
Microsoft Corporation (NASDAQ: MSFT) ranks 2nd on our list of the 10 best FAANG stocks to buy now. The Washington-based tech company sells devices, software, cloud computing service through Azure and business solutions.
On July 28, JPMorgan analyst Mark Murphy maintained an Overweight rating on Microsoft Corporation (NASDAQ: MSFT) and increased the firm’s price target to $310 per share from the previous $300, highlighting the tech company’s exceptional recent quarter result.
According to recent reports, Microsoft Corporation (NASDAQ: MSFT) is in active discussions to invest in Indian budget hotel chain Oyo at a $9 billion valuation ahead of its intended IPO. Meanwhile, in the last week of July, Microsoft Corporation (NASDAQ: MSFT) announced the acquisition of Suplari, an AI-powered analytics firm, to boost the tech corporation’s financial data analysis and management. The shares of Microsoft Corporation (NASDAQ: MSFT) jumped 3% in the last month.
The company has a market cap of $2.14 trillion. In the fourth quarter of the fiscal year 2021, Microsoft Corporation (NASDAQ: MSFT) reported an EPS of $2.17, beating estimates by $0.25. The company’s fourth-quarter revenue came in at $46.2 billion, increasing 21% year over year and beating revenue estimates by $1.85 billion. The stock has gained 13% in the past three months.
By the end of the first quarter of 2021, 251 hedge funds followed by Insider Monkey held stakes in Microsoft Corporation (NASDAQ: MSFT) with a total value of $58.9 billion, down from 258 hedge funds $52.8 billion, respectively, a quarter earlier.
1. Facebook, Inc. (NASDAQ: FB)
Number of Hedge Fund Holders: 257
Topping the 10 best FAANG stocks to buy now is Facebook, Inc. (NASDAQ: FB). The California-based company is the largest social networking company globally, with 2.9 billion monthly active users. Facebook, Inc. (NASDAQ: FB) also operates and develops the instant messaging apps Messenger and WeChat and photo-sharing app Instagram.
Truist analyst Youssef Squali maintained a Buy rating on Facebook, Inc. (NASDAQ: FB) on July 29 and increased the firm’s price target to $425 per share from $400, noting the company’s AR/VR technologies, as well as video and commerce, as significant growth drivers.
The company has a market cap of $1 trillion. In the second quarter of 2021, Facebook, Inc. (NASDAQ: FB) reported an adjusted EPS of $3.61, beating estimates of $3.03. The company’s second-quarter revenue was $29.08 billion, an increase of 58% year over year and beating revenue estimates of $27.89 billion. The stock has gained 31% year to date, and shares increased 9% in the last three months.
By the end of the first quarter of 2021, 257 hedge funds followed by Insider Monkey held stakes in Facebook, Inc. (NASDAQ: FB) with a total value of $40.9 billion.
In its Q2 investor letter, Wedgewood Partners mentioned Facebook, Inc. (NASDAQ: FB) and discussed its stance on the firm. Here is what the fund said
“Facebook’s first-quarter 2021 revenues grew an astonishing +48% (constant currency), compared to +18% growth from a year ago. Unlike Alphabet, growing headcount +26% more recently. Facebook has pulled forward several years of investment during the past few years and has had a particular focus on content curation capabilities with the goal of making its platforms safer and more accessible for brands and users. The company should be able to increasingly automate these functions as its heavy investments in artificial intelligence, especially machine learning, yield productivity benefits. The stock continues to trade at a meaningful discount compared to other companies that are growing revenues this quickly and finished the quarter as our second-largest weighting.”
