According to many investors and analysts, FAANG companies exhibit several competitive advantages that make them stronger than their competitors and also become attractive long-term investments
They have historically outperformed the S&P 500 index and given investors concrete reasons to believe that the FAANG make excellent investments. Most of the FAANG companies also benefit from the network-effect such as Apple, which can deploy new software and services to billions of active iPhone
users and other devices to create a continual cycle that ensures that the company continues to prosper. Similarly, Amazon’s Prime services attract millions of shoppers to its marketplace every-day, creating a lock-in effect.
According to the analysts, these competitive advantages make the FAANG stocks great potential investments. Moreover, all of these five companies have intangible assets that enable them to produce way higher levels of profitability than their competitors.
However, they believe that even if you choose to invest in the FAANG stocks for the long-term, you need to invest in the right ones. That is because, although these stocks get grouped together, some of them might be better than the others.
For example, a large group of investors believe that Netflix is a fairly recession-proof stock compared to most companies because it offers outstanding value relative to its price. Similarly, some other stocks in the FAANG group may be in a better position in the market and capable of surviving serious economic shocks as compared to the rest.
Therefore, even though the FAANG stocks have positive upward potential and have proven to be market leaders, it is necessary to do your own research based on your long-term financial goals, risk appetite and return expectations before investing in them.
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