Growing your money with individual stocks is a lot easier than pundits make it out to be. The market-crushing returns of the FAANG stocks shows that investing in dominant companies that consistently report strong revenue growth is all you need to build wealth.
The FAANG acronym refers to the following companies:
- Meta Platforms (formerly Facebook) (META 3.91%)
- Amazon
- Apple
- Netflix (NFLX +0.27%)
- Alphabet (formerly Google)
Over the last 10 years, the S&P 500 index returned 207% (excluding dividends). The worst performer in the FAANG group was Apple, but it was no slouch by any means, returning 538%. The best performance was Netflix's 1,400% return.
The FAANG stocks are all household names today, just as they were 10 years ago. It would be easy to make an investment case for all these incredible stocks, but there are two that stand out as great buys right now for their current business momentum and their prospects.
1. Netflix
Several new streaming services have become available in recent years, but Netflix continues to reign supreme in digital entertainment. The company just issued another strong earnings report that points to excellent prospects for shareholders.
Netflix's global membership grew 14% year over year in the third quarter (ended Sept. 30) to reach 282 million. The company has been on fire since it put an end to password sharing and forced all users to sign up for a membership. Moreover, the results reflect a large content budget that is driving a steady cadence of hit movies and shows that are winning customers in droves.
NASDAQ: NFLX
Key Data Points
It's clear Netflix has joined the ranks of top Hollywood studios that have been around for a century. The company received 107 nominations and won 24 awards at this year's prime-time Emmys, and it continues to release content that draws a huge audience and gets people talking. The Union and Rebel Ridge were its two most-watched films in the third quarter, receiving a combined 216 million views.
Netflix is a very profitable business, with a margin of more than 20%. Its stellar financials will continue to help the company cement its status as the leading streaming service: It spent $12 billion on content production through the first nine months of 2024, up from $9 billion last year, which will ultimately drive subscriber growth.
Analysts expect earnings to grow at an annualized rate of 26% in the coming years, which should drive excellent returns for Netflix investors.
2. Meta Platforms
Meta is another highly profitable business that is dominating its market. There are more than 3.2 billion daily active users across its apps. Facebook and Instagram are two of the top three most-used social media platforms in the U.S., according to Statista. (Pinterest is second.) Meta has posted robust revenue growth this year that shows it is widening its competitive moat with investments in technology.
NASDAQ: META
Key Data Points
Meta won't report its third-quarter results until Oct. 30, but the company has experienced tremendous momentum this year. A recovering digital ad market drove a 22% year-over year increase in revenue in the second quarter, and that followed a 27% year-over-year increase in the first quarter.
Management noted strong growth in the U.S. across WhatsApp, Facebook, Instagram, and Threads. And the company is seeing positive returns on its investments to attract 18- to 29-year-olds, a positive indicator for the future.
This momentum comes as Meta rolls out artificial intelligence (AI) features that improve content recommendations and advertising tools. The company expects further advancements in AI will help advertisers bring more relevant ads to users, in addition to more advanced features for users.
Meta has faced increasing competition in recent years from Snap, TikTok, and other social media apps. But the number of people regularly using Meta's apps continues to grow impressively, and it still commands a huge share of the digital advertising market.
The company's trailing-12-month net profit tripled over the last five years to $51 billion, and analysts expect earnings per share to grow at an annualized rate of more than 22% in the coming years, which should support strong returns for Meta shareholders.
