Motley Fool co-founder David Gardner has long-embraced the mantra that winning stocks keep winning -- and that's truly been the case for the FAANG stocks.

  • Facebook (NASDAQ: FB)
  • Apple (NASDAQ: AAPL)
  • Amazon (NASDAQ: AMZN)
  • Netflix (NASDAQ: NFLX)
  • Google, which is now a subsidiary of Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG)

Everyone's a winner if you bought and held the FAANG stocks

If you think the benchmark S&P 500 or tech-heavy Nasdaq Composite have been unstoppable since the market bottomed out following the Great Recession in March 2009, you should take a closer look at the returns of the FAANGs. With the exception of Facebook, which debuted as a public company nine years ago, here's how the FAANGs have performed, relative to the S&P 500 and Nasdaq Composite, since the Great Recession bottom on March 9, 2009:

  • Facebook: Up 828% (since 2012 debut)
  • Apple: Up 4,612%
  • Amazon: Up 5,704%
  • Netflix: Up 9,608%
  • Alphabet: Up 1,621%
  • S&P 500: Up 543%
  • Nasdaq Composite: Up 1,054%

There really hasn't been a wrong answer among the FAANGs. Even if you chose Alphabet over Netflix, Amazon, or Apple, you're sitting on an outperformance of nearly 1,100% over the most widely followed benchmark stock index.

All of the FAANGs are leaders in their respective industries, they're top-notch innovators, and with the exception of Netflix, they're generating a mountain of cash flow on an annual basis. It also doesn't hurt that they're also household names, which has made them a popular destination for investment dollars.

But as we move into the second half of 2021, one FAANG stock stands out for its value relative to its high-growth potential. If you buy this stock, my expectation is that it'll outperform its peers over the next six months and, perhaps, well beyond.

The No. 1 FAANG stock to buy for the second half of 2021

While I'm a fan of four of the five FAANGs (sorry, Netflix, I'm not thrilled about the increasingly competitive landscape for streaming), the one that I expect to outrun its peers is e-commerce giant Amazon. Before I explain how Amazon could be considered a "value," as I've described it, you first need to understand how incredibly dominant the company's two core operating segments have become.

The first dominant segment, which is what initially put Amazon on the map, is its online retail marketplace. Back in April, eMarketer estimated that Amazon's share of U.S. online retail would expand to 40.4% in 2021. For context, this is more than five times higher than the next-closest competitor, Walmart, which controls an estimated 7.1% of online retail. In fact, if you add up No.'s 2 through 10, Amazon's share of U.S. retail e-commerce sales would still be over 50% larger.

Admittedly, retail doesn't offer the best margins, and Amazon knows it. That's why it's been pushing Prime memberships, which come with perks like free/expedited shipping and access to Amazon's streaming platform.

Thus far, more than 200 million people worldwide have signed up for Prime. That's great news because Prime members are incented to spend more than non-Prime customers in order to get the most out of the membership. Plus, the billions of dollars collected in fees from Prime helps buffer Amazon's retail margins and ensures it undercuts its brick-and-mortar competitors on price.

The second source of dominance comes from cloud-infrastructure services. With more businesses than ever pushing online and moving data into the cloud, demand for Amazon Web Services (AWS) storage and solutions has soared. Whereas most businesses struggled during the worst economic downturn in decades in 2020, AWS registered full-year sales growth of 30%.

According to estimates from Canalys, which leaned on first-quarter operating results from major cloud service providers, the $13.5 billion AWS raked in during the first quarter gives it a 32% share of worldwide cloud-infrastructure spending. Since cloud services generate vastly superior margins to retail or advertising, AWS has quickly become the primary generator of operating income for Amazon, despite only accounting for an eighth of total sales.

Amazon is headed for an historically cheap valuation

Now that you have a better idea of why Amazon is so unstoppable, it's time to get to the heart of the matter -- why it's going to outperform its FAANG peers over the next six months and, likely, well beyond.

Most investors are familiar with using price-to-earnings or price-to-book as sort of a broad-stroke measure of value. But these traditional fundamental metrics have never worked well for Amazon, primarily because outgoing CEO Jeff Bezos aimed to reinvest the bulk of the company's operating cash flow to grow the business. Thus, price-to-operating cash flow has historically been a much more accurate measure of whether or not Amazon is relatively pricey or inexpensive.

What's particularly interesting about Amazon is that it's ended each of the past 11 years with a price-to-cash-flow multiple of between 23 and 37. You'll find similar high cash flow premiums (albeit with different multiples) for Facebook and Alphabet, as well.

Amazon has had a habit of trouncing Wall Street's annual cash flow per share estimates for years. Based on the 2021 estimate, it's valued at a multiple of 26 times cash flow.

But where things get interesting is in 2023 and 2024. The continued growth of online sales, higher advertising revenue, and more importantly, the growth of AWS is expected to more than double the company's operating cash flow.

If Wall Street's consensus estimate of $314.20 in annual cash flow per share proves accurate, Amazon could be valued at $9,000 a share by 2024 and still be well within its historic cash flow multiple range. None of the other FAANGs are expected to see their operating cash flow soar quite like Amazon by mid-decade.

Nominally speaking, Amazon doesn't look like a value. But taking into account its retail and cloud infrastructure dominance, as well as its rapidly expanding operating cash flow, it's the FAANG stock that clearly offers the most upside.

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