Every investing generation has its share of legendary companies, but I do not believe that there has been another grouping of companies that has dominated the market as completely as these six have done over the recent past.
A Decade of Domination
To understand how the FANGAM stocks made the last decade their own, you need to go back to the start of 2010, and see how the market viewed each one then:
– The Lagging Giant: At the start of 2010, Microsoft had a market capitalization in excess of $270 billion, and was second only to Exxon Mobil, with a market cap of $320 billion, among US companies, but that represented a come down from its status as the largest market cap company at the start of 2000, with a market cap exceeding $500 billion.
– The Rising Star: At the start of 2010, Apple’s market cap was approaching $200 billion, making it the fifth largest US company in terms of market cap, but that was a quantum leap from its market cap of $16 billion, ten years earlier.
– The Field of Dreams Company: By early 2010, Amazon had cemented its status as online retailer, capable of growing its revenues at the expense of its brick and mortar competitors, but without a clear pathway to profitability. The market seemed to be willing to overlook this limitation, giving the company a market cap of more than $50 billion, a significant comeback from the dot-com bust days of 2001, when it was valued at less than $4 billion.
– The New Tech Prototype: In January 2010, Google Alphabet Inc (NASDAQ: GOOGL) was already the prototype for the new tech company model, having reached a hundred-billion dollar market cap threshold faster (a little more than a year after going public) than any other company in history, and with its market capitalization of more than $160 billion in early 2010, the company was already on the top ten list among US companies.
– On the cusp: In early 2010, it is unlikely that anyone would have put Netflix on the list of big-time winners, since its market capitalization was less than $4 billion and its business model of renting content and signing up subscribers was seen as successful, but not scalable.
– The glimmer in the market’s eye: At the start of 2010, Facebook was still a private business, though venture capitalists were clearly excited about its prospects, pricing it at roughly $14 billion in January 2010, based primarily on its user numbers.
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It is true that US equities did well over the decade, but the FANGAM stocks rose much more, rising from 6.5% of the overall market capitalization of all US equities, in January 2010, to close to 15% in January 2020. To provide perspective on how much the FANGAM stocks contributed to the overall equity market’s rise, I compute the change in market capitalization each year at the FANGAM stocks and all other US equities, each year from 2010 to 2019:
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The $4.35 trillion in market cap added by the FANGAM stocks accounted for 19% of the overall increase in equity value across all US equities (>7000 stocks).
