Author: Damian Davila / Source: Wise Bread
Warren Buffett said it best: “Someone’s sitting in the shade today because someone planted a tree a long time ago.” One of those big trees in the investing world is FAANG, an acronym for five high-performing technology stocks: Facebook, Apple, Amazon, Netflix, and Google (now Alphabet, Inc.
).Let’s find out how a cool $500 investment in FAANG would have fared over a six-year investment period.
2012: Off to a good start
Since Facebook held its initial public offering (IPO) on May 18, 2012, this date will be our starting point. And it’s a great one because Facebook’s IPO at that time was the largest technology IPO in U.S. history, raising more than $16 billion.
Let’s imagine that you allocated exactly $100 to each one of the FAANG stocks. Assuming that you could buy fractions of shares, here’s how many shares of FAANG you would have acquired back on May 18, 2012, rounded to the nearest hundredth. In this and all calculations throughout this article, we’ll use the closing price.
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Facebook: $100 @ $38.23 per share = 2.61 shares
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Apple: $100 @ $75.77 per share = 1.32 shares
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Amazon: $100 @ $213.85 per share = 0.47 shares
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Netflix: $100 @ $9.99 = 10.01 shares
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Google: $100 @ $300.50 = 0.33 shares
At the end of 2012, your initial $500 in FAANG would be worth $537, up 7.51 percent mainly due to a 32.43 percent jump in Netflix’s stock price over the same period.
2013: Netflix leading the pack
You would have loved watching Netflix’s stock price this year, as it went up 297.6 percent year-over-year, closing at $52.60. After 2012, Facebook traded sideways and didn’t trade above its IPO price until July 31, 2013. But then it too ended 2013 strong with a 105.30 percent year-over-year increase in price. At the end of 2013, your FAANG portfolio would be worth $1,147.50, up 113.69 percent from the previous year.
2014: A year of stock splits and slow growth
On June 9, 2014, Apple issued its fourth stock split — this time, a seven-for-one stock split. This means that your 1.32 would have become 9.38 shares. Earlier that year on March 27, 2014, Google executed a 100 percent stock spinoff, which is similar to a two-for-one stock split.
All said and done, your portfolio’s 2014 year-end value of $1,160.95 ended slightly above that of 2013 (a 1.17 percent year-over-year increase). What caused the small return? On December 31, 2014 the stock prices of Amazon, Netflix, and Google were down 22.18, 7.22, and 4.24 percent respectively from exactly the year before.
FAANG beats the S&P 500 over six years
Let’s fast-forward a few years to May 18, 2018 and analyze the performance of our investment in FAANG against the most common stock market bench mark, the S&P 500.
Assuming that you were to hold onto your entire $500 FAANG portfolio from May 18, 2012 until May, 18, 2018, your portfolio would have been worth a…
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