Facebook, Amazon, Apple, Netflix and Alphabet’s Google form the group that Wall Street dubbed the FAANG stocks. The five tech giants in US are so big that they even have their own index tracking their share price performance.
FAANG Suffering From Its Worst Slump
Following a series of scandal and Trump’s “war declaration” on trade, the FAANG index has slipped more than 10 percent from its peak in the last one year. Among FAANG, Facebook was hit the hardest as its data leakage scandal to third party was exposed. The US government is looking into regulating the privacy of users’ data to prevent them from being compromised for advertising or marketing.
Reasons To Invest In FAANG
Given the relatively high valuation of FAANG stocks, the ongoing scrutiny of the sector against controversial industry practices could lead to further short-term volatility on FAANG. However, DBS believes that FAANG will regain its investment appeal in the long run due to its importance to the economy.
Over the years, FAANG has been able to influence other industries into changing the way business has been conducted. Yet, there are still many opportunities that lie within the technology space for FAANG to tap into, from mobile payments to software security and cloud technology. The established monopolistic advantage of FAANG also gives them the edge in capturing opportunities arising from disruptive technologies.
Investors Takeaway: FAANG ETFs to consider
For investors who would like to capitalise on the tech sector’s short-term weakness to boost exposure at discounted share prices, here are some FAANG ETFs you can consider.
- PowerShares QQQ Trust Series 1
The PowerShares QQQ Trust Series 1 ETF tracks the performance of the Nasdaq 100 Index. It holds large cap U.S. stocks and excludes investment in the financial sector. The ETF weights its holdings using a market capitalization methodology.
- Technology Select Sector SPDR
The Technology Select Sector SPDR Fund is an ETF that tracks the performance of the The Technology Select Sector Index. It holds both large and mid-cap tech stocks with most of its investment allocation in the US. The ETF weights its holdings using a market capitalization methodology.
- Vanguard Information Technology
Vanguard Information Technology ETF is an ETF which tracks the performance of the MSCI US Investable Market Information Technology Index. Its fund holdings include technology stocks of all cap sizes with a focus in the U.S. and on computer, software, and internet companies. The ETF also uses a market capitalization weighting methodology.
- iShares US Technology
iShares U.S. Technology ETF is an ETF incorporated in the USA. Its objective is to seek investment results that correspond to the performance of the Dow Jones U.S. Technology Sector Index. The Fund concentrates its investments in the technology sector of the U.S. market to approximately the same extent of the Index’s constituents.
- First Trust Technology AlphaDE
First Trust Technology AlphaDE ETF tracks the StrataQuant Technology AlphaDEX Index. It holds U.S. large and mid-cap technology stocks from the Russell 1000. Its investments are selected and weighted using the AlphDEX selection methodology and rebalanced quarterly.
- Fidelity NASDAQ Composite Index
Fidelity NASDAQ Composite Index Tracking Stock ETF is an ETF that aims to provide investment returns that closely correspond to the price and yield performance of the NASDAQ Composite Index.
- First Trust Dow Jones Internet
The First Trust Dow Jones Internet ETF aims to track the performance of the Dow Jones Internet Index. The Dow Jones Internet Index consists of companies that generate at least 50 percent of its annual sales/revenues from the Internet.