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3 FAANG Stocks I Bought for My Starter Portfolio

By Rachel Warren and Toby Bordelon – Sep 29, 2021 at 9:30AM

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Investors can buy and hold these companies for a lifetime.

Alphabet (GOOG -2.56%) (GOOGL -2.51%), Apple (AAPL -2.54%), and Amazon (AMZN -3.03%), part of the group of stocks known as FAANG, are hardly new names to most investors. These giant tech companies have continued to deliver attractive revenue increases and share price appreciation year after year, which makes them compelling investments for stock traders of all styles and risk tolerance levels.

In this segment of Backstage Pass, recorded on Sept. 20, Fool contributor Toby Bordelon asks Fool contributor Rachel Warren why these three companies made the cut for her first 10 stock buys. 

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Toby Bordelon: Let's do something different now. Let's move on to, before we get to our final company here. Let's hit the three big tech companies you got on your list. This would be Alphabet, Apple, and Amazon. The three A's, if you will, [laughs] of the tech world. Again, I can't imagine anyone listening to this doesn't know about these companies to some degree.

They're all unique in some ways, right? Alphabet gets most of its revenue from search for advertising revenue, mainly off of search but also in a lot of its other business lines, but still advertising revenue. Amazon is an online commerce company, increasingly a cloud computing company, as well as getting into entertainment.

Alphabet, mainly making their money on sales of computing and mobile device hardware and also the App Store, which is huge for them. Revenue from that 30%, which maybe going away, at least to some degree. But that's where their business, and also music entertainment. They've got some overlap. Amazon and Alphabet compete in cloud computing. Amazon and Apple in entertainment. Apple and Alphabet in the mobile platform, talking of Android versus iOS. 

They're also all huge. All of them are over $1.5 trillion in market cap. When I checked this morning, Apple is already over the $2 trillion mark, I think it's $2.4 trillion or almost at $2.5 trillion mark. I have to imagine that Amazon and Alphabet are going to get to $2 trillion before too long now.

Their growth might be limited going forward, but you can never count them out. I think they're going to be steady growers. I think they're all eventually going to be steady dividend payers too.

Apple already pays as dividend, relatively small, relative to their market cap but they're paying a dividend. If you had me ranked these, if I'm going to rank these in order of my favorite, I would go with Amazon, then Apple, and then Alphabet.

I'm kind of curious how you would put them but then also just what's one thing you like about each of them. Why did you decide to put these three specifically in your portfolio?

Rachel Warren: For sure. Actually, that was literally the ranking I did in my head. [laughs] Yeah, I love, these companies. Obviously, these companies need no introduction.

Alphabet still makes most of its revenue from Google Search. Google is the world's number one search engine. You just can't compete with that. That's a great thing to have in your basket of stocks is a stock with that much staying power. Then it's more and more making a lot of its revenue from its cloud business.

Apple, again, looking at it as a consumer and an investor, I use Apple products every day. I love that it's always innovating, keeping its products fresh and interesting. It's always rolling out new ones. I can never keep up with the latest updates. I get a new phone and then I think I'm behind. [laughs] It also has a great track record of continuously reporting strong growth quarter-after-quarter. I love that. 

Those are the things I want to see in a company. Yeah, it pays the dividend. It's not huge, but it's there.

Then for Amazon, again, it's a company I watch entertainment through a lot, I shop on Amazon all the time. The company has had obviously shares have skyrocketed. I think it's up more than 300% over the past five years.

So another multi-bagger and then some, but I love it that it has its fingers in so many pies. This company is in everything from cloud computing to entertainment, like you said, to e-commerce, these high-growth industries, and continues to grow every time you think, can it grow more, and then every quarter is exceptional. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Toby Bordelon owns shares of Alphabet (A shares), Amazon, and Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Stocks Mentioned

Apple Stock Quote
Apple
AAPL
$142.91 (-2.54%) $-3.72
Alphabet Stock Quote
Alphabet
GOOGL
$96.98 (-2.51%) $-2.50
Amazon.com Stock Quote
Amazon.com
AMZN
$88.25 (-3.03%) $-2.76
Alphabet Stock Quote
Alphabet
GOOG
$97.31 (-2.56%) $-2.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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