Ranking the Original FAANG Stocks

Two InvestorPlace articles recently sparked my interest in all five of the original FAANG stocks.

The first article by Larry Ramer proclaimed that the best days of FAANG stocks were behind them — Amazon.com, Inc. (NASDAQ:AMZN) excepted — citing reasons why Facebook Inc (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX) and Alphabet Inc (NASDAQ:GOOGL) stock were running out of gas.

The second article that caught my attention was Luke Lango’s piece about Alphabet’s new feature, AMP Stories, which Lango feels will put some air under GOOGL stock.

I’m not sure he’s right. To me, it just seems like another version of the same thing, following Snap Inc’s (NYSE:SNAP) original stories and Facebook’s Instagram copy.

I looked at Google’s AMP page, and my first impression was that this feature is addressing larger corporations with big marketing budgets rather than small businesses who could use it to differentiate themselves from their competition by telling a story.

Perhaps I’m cynical, but AMP Stories seems like nothing more than an animated brochure.

I mention these two articles because they got me thinking about the five FAANG stocks in general. As a result, I have ranked them as if I were considering an investment in one or more of them.

Here’s what I came up with.

FAANG Stocks #5: Netflix

I believe Netflix to be one of the best ideas of the early 21st century. That said, I have to agree with Larry Ramer. Any business which generates annual negative free cash flow of $4 billion makes its stock very risky to own.

As recently as November, I argued why Netflix’s valuation is justified. And in my mind, nothing’s changed since.

Unless you understand the risks involved in owning a company with such significant ongoing liabilities, however, owning NFLX stock is not ideal.

For this reason, I rank it last amongst the five FAANG stocks for the average investor.

FAANG Stocks #4: Google

Sorry to all the GOOGL stock owners, but this is where I see it fitting into the FAANG universe.

AMP Stories seems like such a reactive product introduction from a company whose name has already become a verb and who has given us products like Google Drive.

Google might be the second-most valuable public company in the world, but of all the FAANG stocks, it strikes me as the one that’s playing it safe when it should be innovating.

FAANG Stocks#3: Facebook

Do I believe Facebook stock is average? No, not by a long shot. But in the context of the five FAANG stocks, I rank it right in the middle.

This time next year, however, I could see its ranking move higher as a result of its efforts to make its news feed more user-friendly and far less commercial.

Facebook is doing the right thing — a move that’s counter-intuitive to the basic tenets of capitalism. But while it may not be what investors and advertisers want, I do think it is what users want. And as a result, I think Facebook’s revenues will grow at a faster pace.

I guess we’ll find out soon enough.

FAANG Stocks #2: Amazon

Number 2 has got to be Jeff Bezos and Amazon.

Sure, Facebook is much more profitable than AMZN — Mark Zuckerberg’s baby generates five times the operating profits from one-quarter the revenue — but Bezos’ big-picture thinking is changing so many parts of our everyday lives that you can’t help but want to be a part of it.

Amazon is now the third most valuable public company in the world with only Alphabet and Apple ahead of it. I do not doubt that these three will continue their seesaw battle for years to come.

FAANG Stocks #1: Apple

While Larry Ramer thought Amazon was the only FAANG stock whose best days were ahead of it, I would disagree. I think all of them have their redeeming qualities, some more than others.

However, when push comes to shove, I’ve got to put AAPL stock in first place because it has the mother of all balance sheets. If Apple were a fortress, it would be Fort Jefferson.

Apple is so flush it could pay down its $103 billion in debt almost three times without breaking a sweat. Personally, I hope they do, because that would wash away any reservations about its future growth.

For me, AAPL is the FAANG stock to hold forever.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.