In this article, we will be taking a look at the 11 best FAANG stocks to invest in. To skip our detailed analysis of the tech industry, you can go directly to see the 5 Best FAANG Stocks To Invest In.
From FAANG to the Magnificent 7 and Beyond
The technology sector has been on a steady rise for quite a while now, and the most obvious answer to the industry’s propulsion to greater and greater heights is the ongoing obsession with Artificial Intelligence (AI). Many within the AI space today are large tech companies, such as the FAANG names. These days, however, a new moniker has been on the rise to identify the best tech companies of the day: the Magnificent Seven.
The original cohort of tech names to keep an eye on included Meta Platforms, Inc. (NASDAQ:META) (formerly known as Facebook), Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOGL), all coming together to form the FAANG group. Today, these companies are challenged by several others in the market, particularly semiconductor giant NVIDIA Corporation (NASDAQ:NVDA). NVIDIA isn’t alone either, and so the original list of FAANG stocks has had to accommodate the rise of new and old mega-tech companies bolstered by the emergence of AI.
Regardless of what you call these companies or who joins these new exciting groups, the fact remains that the tech sector has been abuzz with news of innovations, rising investments, and higher profitability. At the end of the day, it’s starting to look like tech companies really are starting to rule the world.
The Three AI Amigos
On February 8, Gene Munster, the managing partner of Deepwater Asset Management, joined CNBC’s “Squawk Box” to discuss recent trends in the tech sector and the rise of FAANG stocks, particularly Apple Inc. (NASDAQ:AAPL), Meta Platforms, Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOGL). Here’s what he had to say:
“They have the biggest upside potential relative to where expectations are… these three, I think, are largely unappreciated. I just wanna start with Meta. I think it’s the biggest AI opportunity that’s misunderstood. Most investors understand that Meta is using AI to improve ad campaigns, ad attribution… but there is a significant underappreciated lever that could take this into a whole different atmosphere. This theory comes from Deepwater’s Doug Clinton. He believes that ultimately, they will monetize Llama. Llama is an opensource model. The other foundation models, Claude, and ChatGPT, and Gemini, they’re all closed. Llama has 30 million downloads. If they monetize this, they will likely announce a cloud infrastructure… that is a whole new shift, and new benefit to Meta.”
On the rise of Apple Inc. (NASDAQ:AAPL) in the AI space, Munster said the following:
“Apple’s gonna come out with their own foundation model likely in June, and they’re gonna allow this to do personalized AI. This is really gonna capture 20% of the world’s interest, and they can charge $10 a month for this.”
Most investors have been overlooking Apple Inc. (NASDAQ:AAPL) in the AI space, but Munster thinks the company is on its way to benefitting from a new opportunity.
Biden Administration’s Investment in Chips
In an additional boost for the tech sector, the Biden Administration has announced a $5 billion investment in chips, a move that is bound to uplift the semiconductor industry. On February 9, Ronnie Chatterji, professor at Duke University and former White House Chips Coordinator, joined CNBC’s “Squawk Box” to discuss this move. He noted that this move signals a partnership between the public and private sectors to ensure that the US continues to lead “in the current generation of chips” alongside the “next generation.” The investment is thus being welcomed overwhelmingly and may signal greater things for semiconductor companies in 2024.
With the current situation being so overwhelmingly in favor of tech companies, we have compiled a list of the best FAANG stocks to buy now. These include some of the top American tech stocks to buy apart from the original FAANG stocks.
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Our Methodology
We compiled our list of the best FAANG stocks to invest in by consulting Insider Monkey’s hedge fund data for the third quarter and selecting major tech companies with the highest number of hedge fund investors. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Best FAANG Stocks To Invest In
11. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 102
Netflix, Inc. (NASDAQ:NFLX) is among the original FAANG names. It is a streaming company that operates a popular online streaming platform by the name of Netflix. The company is based in Los Gatos, California.
DZ Bank analyst Markus Leistner upgraded shares of Netflix, Inc. (NASDAQ:NFLX) from Hold to Buy and placed a $600 price target on the stock on January 25.
Netflix, Inc. (NASDAQ:NFLX) was found in the 13F holdings of 102 hedge funds at the end of the third quarter. Their total stake value in the company was $7.8 billion.
Polen Capital mentioned Netflix, Inc. (NASDAQ:NFLX) in its fourth-quarter 2023 investor letter:
“In the fourth quarter, the top relative and absolute contributors to the Portfolio’s performance were Netflix, Inc. (NASDAQ:NFLX), ServiceNow, and Salesforce.
During Netflix’s pandemic grow-over issues in 2022, the market seemed to believe there was little revenue or free cash flow growth left to be had for this business. The pandemic had pulled forward user growth, and the company then disclosed that there were over 100 million households that were using Netflix but not paying for it by borrowing a paid user’s account. After we assessed this information, better understood how the company could monetize shared passwords, and realized the win-win for Netflix and consumers from introducing an ad-supported subscription tier, we meaningfully added to our position in Netflix in the summer of 2022. We saw a clear path to much better monetization of an already robust and differentiated platform with a continued commitment to improved content spend efficiency and free cash flow growth.
Fast forward to today, Netflix has made meaningful progress on monetizing shared passwords and laying the foundation for consumer choice, although the ramp in advertising tier subscribers remains in the beginning stages. The low-hanging fruit may already have been picked on password sharing efforts, but our research shows there should be long tails of revenue and free cash flow growth. In our opinion, Netflix remains the most advantaged and profitable streaming service with opportunities to continue adding subscribers and raising prices as it demonstrates more value to consumers over time. Over the longer term, we also expect significant advertising revenue. That said, the market finally seems to have appreciated some of this. As a result, we trimmed our position from approximately 8% of the Portfolio to approximately 5% in the fourth quarter.”
Like Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX) is among the best FAANG stocks to buy now.
10. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 107
An Overweight rating was maintained on shares of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) by Simon Coles at Barclays on January 19. The analyst also raised his price target on the stock from $110 to $125.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is an information technology company. The company manufactures and sells integrated circuits and other semiconductor devices. It is based in Taiwan.
We saw 107 hedge funds long Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in the third quarter, with a total stake value of $9.7 billion.
Fisher Asset Management was the most prominent shareholder in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of the third quarter, holding 31.1 million shares in the company.
Here’s what Wedgewood Partners said about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its fourth-quarter 2023 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was also a top contributor to performance. The Company began shipping chips that were fabricated using its industry-leading “N3″ node. Nearly all of the Company’s N3 capacity has been filled by high-end chip designers such as Apple, NVIDIA and even Intel. As high-performance computing, particularly related to AI in both data centers and edge devices, continues to build momentum, the Company will be a key supplier for many years to come. Despite the boom-and-bust cycle in demand seen for many semiconductors during Covid-19 and post-Covid-19, the Company should be able to post solid double-digit growth next year as inventories and end-market demand across most of its technology nodes get back to normal levels. The Company also maintains dominant market share in leading-edge nodes, which is in short supply, given the difficulties its competitors have had in scaling up EUV-based manufacturing. The Company has been able to secure higher prices because of this and can still generate excellent returns on elevated capital expenditures necessary for this scarce capacity. The Company is arguably one of a handful of the world’s most important and largest companies, but because the Company’s shares trade as an ADR (American Depositary Receipt) the shares are not part of the major stock market indices in the U.S. As a result, the shares are woefully under owned by U.S. investors (institutional and individual), particularly for a company that regularly generates cash flow return on invested capital in excess of +40%. Therefore, our growing position in these shares represent a significantly relatively overweight portfolio position versus our peers and benchmarks. We could not be more pleased by this anachronistic institutional imperative.”
9. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 110
There were 110 hedge funds long Advanced Micro Devices, Inc. (NASDAQ:AMD) in the third quarter, with a total stake value of $9.2 billion.
Advanced Micro Devices, Inc. (NASDAQ:AMD) is another semiconductor company on our list of the best FAANG stocks to buy. The company is based in Santa Clara, California, and offers graphics processing units, chipsets, and embedded processors, among more.
Toshiya Hari, an analyst at Goldman Sachs, maintains a Buy rating on shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) as of February 1. The analyst also raised the firm’s price target on the stock from $157 to $180.
8. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 112
At the end of the third quarter, Fisher Asset Management was the largest shareholder in Adobe Inc. (NASDAQ:ADBE), holding 4.6 million shares in the company.
Adobe Inc. (NASDAQ:ADBE) is a computer software company based in San Jose, California, and is one of the most attractive stocks on our list of the best FAANG stocks to buy. It offers products such as the Document Cloud, a unified cloud-based document services platform, and the Creative Cloud, a subscription service providing access to creative products.
As of January 2, Piper Sandler’s Brent Bracelin holds an Overweight rating on shares of Adobe Inc. (NASDAQ:ADBE). The analyst also raised his price target on the stock from $650 to $705.
Adobe Inc. (NASDAQ:ADBE) was seen in the portfolios of 112 hedge funds in the third quarter. Their total stake value in the company was $8.2 billion.
7. salesforce.com, inc. (NYSE:CRM)
Number of Hedge Fund Holders: 122
Based in San Francisco, California, salesforce.com, inc. (NYSE:CRM) is an application software company. It offers Customer Relationship Management (CRM) technology.
At the end of the third quarter, salesforce.com, inc. (NYSE:CRM) had 122 hedge funds long its stock, with a total stake value of $10.5 billion.
An Outperform rating was maintained on salesforce.com, inc. (NYSE:CRM) on January 23 by Rob Oliver at Baird. The analyst also raised his price target on the stock from $300 to $310.
Polen Capital said the following about salesforce.com, inc. (NYSE:CRM) in its fourth-quarter 2023 investor letter:
“In the fourth quarter, the top relative and absolute contributors to the Portfolio’s performance were Netflix, ServiceNow, and Salesforce, Inc. (NYSE:CRM).
Salesforce has continued to grow its revenues at what we see as a healthy rate despite market concerns about the impact of the weaker macroeconomy on its business and penetration rates in its core CRM offering. Even its most mature and largest offerings, Sales Cloud and Service Cloud, are still growing revenue at double-digit rates. In addition, management realized that their cost structure, especially in salespeople, had gotten too bloated. Over the past year and a half, the company has run a much more streamlined expense structure that has led to strong operating margin expansion and earnings growth. Importantly, we do not feel Salesforce has cut into its innovation or sales muscle through these cost cuts but has eliminated unnecessary excess fat from the organization.”
Like Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Apple Inc. (NASDAQ:AAPL), salesforce.com, inc. (NYSE:CRM) is one of the top FAANG+ stocks to invest in today.
6. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 134
Holding 54.9 million shares in the company, Fisher Asset Management was the largest shareholder in Apple Inc. (NASDAQ:AAPL) at the end of the third quarter.
Samik Chatterjee at JP Morgan maintains an Overweight rating on Apple Inc. (NASDAQ:AAPL) alongside a $215 price target as of February 2.
Apple Inc. (NASDAQ:AAPL) is a big tech company and one of the best FAANG stocks on our list. It is based in Cupertino, California, and is well known for its flagship iPhone, iPad, and Mac products.
Our hedge fund data for the third quarter shows 134 hedge funds holding stakes in Apple Inc. (NASDAQ:AAPL). Their total stake value in the company was $179 billion.
Bireme Capital mentioned Apple Inc. (NASDAQ:AAPL) in its fourth-quarter 2023 investor letter:
“We also shorted Apple Inc. (NASDAQ:AAPL) in Q3. At our average price of around $190 per share, Apple traded at 30x peak earnings and a $2.8 trillion market cap. While Apple is indeed a magnificent company, this valuation is simply too rich for a business with a substantial cyclical component. The company is projected to grow revenue at a mere 4% rate between 2022 and 2026. We think the total return on Apple stock will be lower than the market, and especially our long positions, over the next few years.”
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Disclosure: None. 11 Best FAANG Stocks To Invest In is originally published by Insider Monkey.