An Alternative to the FAANG
There could be a cheaper alternative to the vaunted FAANG stocks. I call it the NAMPOF, and my alternative offers some dividends.
The classic FAANG consists of Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Netflix (NASDAQ: NFLX), and Alphabet (NASDAQ: GOOGL) or Google.
I don’t like the FAANG because it is expensive, and because only FAANG stock; Apple pays a dividend. Moreover, I think Mr. Market grossly overprices three FAANG stocks; Alphabet, Netflix, and Facebook.
The FAANG is overpriced
In particular, the FAANG is too expensive for many investors. Here are its prices from 13 September 2019.
- Facebook: $187.19
- Amazon: $1,839.34
- Apple: $218.75
- Netflix: $294.15
- Alphabet $1,240.03 (Goggle)
Given those share prices buying one share of FAANG cost $3,779.46 on 13 September 2019. Plus, you can currently only earn dividend income from one FAANG stock, Apple. I think no dividend defeats the purpose of owning a cash rich company. What is the point of a share in a cash rich company – if the company is not sharing the cash with you?
That being said, there is a lot to like about the FAANG. Its members are high-growth and generate lots of cash.
My Alternative to FAANG
My alternative to the FAANG is the NAMPOF. The NAMPOF consists of NIVIDIA (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), PayPal (NASDAQ: PYPL), Oracle (NYSE: ORCL), and Facebook (NASDAQ: FB).
NAMPOF is cheaper than FAANG. For instance, I estimate one combined “share” of it cost $885.95 on 13 September 2019.
- NVIDIA: $181.94
- Apple: $218.75
- Microsoft: $137.32
- PayPal: $107
- Oracle: $53.75
- Facebook: $187.19
Thus you could buy over four shares of NAMPOF for the cost of one unit of FAANG. To elaborate, $876.46 multiplied by four is $3,543.80. Meanwhile the combined cost of FAANG was $3,779.46 on 13 September 2019.
Please note that these costs will be different from real time stock prices. Unfortunately, I know of no way to constantly update articles with real time stock prices.
A Dividend-Paying Alternative to FAANG
Interestingly, the NAMPOF could pay a combined dividend of $2.11. Here are the four dividend paying NAMPOF members.
- NVIDIA: 64₵
- Apple: 77₵
- Microsoft: 46₵
- Oracle: 24₵
Thus each share of NAMPOF could generate $2.11 in dividends. However, a share of FAANG could generate 77₵ in dividends, and it cost $3,779.46 on 13 September 2019.
Therefore, I consider the FAANG a great growth stock but a terrible income stock. However, I think the NAMPOF could be both a good growth stock and a nice dividend stock.
Some Growth Stock Alternatives to FAANG
The main attraction of FAANG to investors is its capacity for growth. Growth is important because growth leads to cash and income. However, growth without cash and income is useless for most investors.
The FAANG are growing dramatically. Stockrow credits Facebook with a 27.62% revenue growth rate in the quarter ending on 30 June 2019. However, Apple had a 1.02% in the same quarter, after two quarters of falling revenue growth.
Amazon had a 19.89% revenue growth rate in that quarter. Netflix’s revenues grew by 26% in that quarter. Finally, Alphabet’s (NASDAQ: GOOG) revenues grew by 19.25% in that period.
NAMPOF offers a high growth rate because it contains two FAANG members: Apple and Facebook. Meanwhile Stockrow reports Microsoft had a revenue growth rate of 1.07% in the last reported quarter. Oracle’s revenue growth fell by 1.02%, and PayPal’s revenues grew by 11.82% in the quarter ending on 30 June 2019.
However, NAMPOF contains, one company facing a dramatic drop in revenue growth NVIDIA. For instance, NVIDIA’s revenue growth rate fell by -17.42% in the quarter that ended on 28 July 2019. However, as recently as 29 July 2018, NIVIDIA reported quarterly revenue growth rate of 40.04%. Thus, NVIDIA is capable of greater revenue growth than any FAANG stock.
Thus, I think NAMPOF offers a level of revenue growth that rivals the FAANG. Yet a share of NAMPOF costs one fourth the combined cost of the FAANG.
These non-FAANG stocks generate a lot of cash
Ultimately, I like the NAMPOF stocks because they generate a lot of cash. PayPal, for example reported a free cash flow of $1.035 billion, a financing cash flow of $2.498 billion and an operating cash flow of $2.201 billion on 30 June 2019.
Impressively, Microsoft reported a quarterly operating cash flow of $52.185 billion, and a free cash flow of $12.057 billion 30 June 2019. Oracle offered an operating cash flow of $14.551 billion, an investing cash flow of $26.557 billion, and a free cash flow of $4.009 billion 31 May 2019.
Incredibly, Apple reported an operating cash flow of $49.481 billion, an investing cash flow of $46.694 billion, and a free cash flow of $9.636 billion on 29 June 2019. Facebook reported a quarterly operating cash flow of $17.924 billion, and a free cash flow of $4.983 billion on 30 June 2019. Plus, NVIDIA offered an operating cash flow of $1.656 billion, an investing cash flow of $5.04 billion, and a free cash flow of $823 million on 28 July 2019.
These FANG alternatives offer a lot of value
The NAMPOF stocks offer a lot of value.
NVIDIA for example, had $7.105 billion in cash and equivalents; $1.37 billion in short-term investments and total assets of $14.187 billion on 28 July 2019. Meanwhile PayPal had $4.909 billion cash and equivalents; $6.672 billion in short-term investments, and $48.391 billion in assets.
Microsoft had $11.356 billion in cash and equivalents and $286.556 billion in total assets on 30 June 2019. Oracle had $20.514 billion in cash and equivalents, $17.313 billion in short-term investments and $106.013 billion in total assets on 31 May 2019.
Impressively, Apple had $50.530 billion in cash and equivalents; $44.084 billion in short-term investments, and $322.239 billion in assets on 10 September 2019. Moreover, Facebook had $13.877 billion in cash and equivalents, $34.719 billion in short-term investments, and $117.006 billion total assets on 30 June 2019.
Therefore, I think you could get a lot of value for your buck if invest in NAMPOF. More importantly, Mr. Market currently undervalues the NAMPOFs, making them classic value investments.
NAMPOF is safer and More Diversified than FAANG
In particular, two of the NAMPOFs; Apple and Microsoft, are old and fairly well-established companies for tech brands. Steve Jobs and company founded Apple in 1976; for example, and Bill Gates started Microsoft in 1975.
Meanwhile, the NAMPOF companies operate in a variety of businesses. PayPal is in financial services and Oracle in business software and financial technology. Apple is an equipment maker that is moving into entertainment and financial services.
Microsoft offers a wide variety of software, cloud services, equipment and video games. NVIDIA is a chipmaker that is deeply involved in artificial intelligence, gaming, infrastructure, and gaming.
Furthermore, Facebook is a social media empire that is investing heavily in financial services, fintech, crytpocurrency, blockchain, and virtual reality. Thus, none of the NAMPOFs rests on its laurels. That leads to growth and more money in the future.
Furthermore, Facebook is a social media empire that is investing heavily in financial services, fintech, crytpocurrency, blockchain, and virtual reality. Thus, none of the NAMPOFs rests on its laurels. That leads to growth and more money in the future.
