FAANG vs. MAMAA Stocks: How They’re Different and What To Know Before Investing

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When consumers enter the stock market, hoping to make big money, they often look to the technology sector. Companies such as Apple and Google hold so much investor appeal that CNBC money personality Jim Cramer created a delightfully intimidating acronym: FAANG.

In 2021, Cramer changed the acronym. “Bye-bye FAANG, hello MAMAA,” he said on his CNBC show “Mad Money.” He presented the change as a significant shift in who leads the tech space.

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FAANG is still alive and well three years later, and the debate over who leads the pack is ongoing. Let’s cut through the noise and look at the stocks underneath the acronyms. The differences are smaller than you might expect.

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FAANG and MAMAA: The Acronyms Explained

FAANG is a group of five stocks from some of the most famous technology companies in the world.

  • Facebook

  • Amazon

  • Apple

  • Netflix

  • Google

MAMAA is a remake of FAANG. It includes a slightly different mix.

Fresh branding aside, 80% of the list is the same. The difference is that Microsoft has replaced Netflix. However, that doesn’t necessarily mean Netflix has lost its power. It remained one of the big players even after it fell from MAMAA’s arms.

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Netflix and Microsoft: Three Years, Head-to-Head

Cramer cut Netflix in 2021 because the company’s market capitalization, the total value of its shares, hadn’t kept up with the other four. However, not all experts agreed with Cramer’s choices. Prism MarketView pointed out that although Netflix’s market cap was down, its share value was still rising faster than Apple’s and Amazon’s.

Three years later, all five FAANG stocks hold their own. Netflix typically hovers at the bottom of the pack but occasionally hops above one or more of its closest competitors: Amazon, Google and Apple. They all routinely perform above the S&P 500, an indicator of the stock market’s overall performance.

Market Capitalization Numbers

As of June 2024, Netflix’s year-to-date return is 2.5 times higher than Microsoft’s, which replaced it in the now not-so-new MAMAA. Then again, Microsoft’s market cap is over $3 trillion — much higher than Netflix’s more than $270 billion.

Microsoft is now the world’s biggest company by market cap. It has earned its place among MAMAA’s children, primarily due to its heavy investments in artificial intelligence (AI). Microsoft now has 25% of the cloud computing market and is expanding its in-house AI capabilities, suggesting its high market cap might go even higher.

Netflix and Microsoft are both megacap companies, the highest tier for market capitalization. According to the Financial Industry Regulatory Authority, they’re less vulnerable to market volatility. Microsoft’s success is soaring, which might make it a stronger bet.

Expert Rankings

Investment numbers point to Microsoft as a strong bet, but with caveats. Investor’s Business Daily says it’s a long-term leader, but big investors have only a tepid interest in it. That doesn’t mean it’s a miss, only that its value may not spike soon.

Netflix’s scores from Investor’s Business Daily are even higher, reaching the top of the growth scale. Experts credit its growth to popular programming and recent ventures into new content, including livestreaming and video gaming. Investor’s Business Daily enthusiastically recommends buying Netflix but suggests watching the market, just in case.

The Other Players: Meta, Alphabet, Amazon and Apple

Now let’s talk about the four corporations in both FAANG and MAMAA. Cramer kept them because he believed they’re still leading players, but here’s what more current numbers say.

Meta, Formerly Facebook

Meta’s share price dipped in spring 2024 after an early-year peak. However, recent movement shows an uptick, and share value remains far above spring 2023 levels.

Advisory firms have confidence in Meta’s position as a leader, but there are reservations. Meta depends heavily on user data and third-party ad spending, which means there could be a downturn under certain market conditions. Tightening privacy regulations and decreasing ad spend could shake its bottom line.

Meta continues to outperform competitors and maintain a strong leadership position, but many large investors are selling. Investors need to decide whether social media industry changes pose a light or heavy risk.

Alphabet, aka Google

Analysts have more faith in Google’s ability to lead the market in AI and paid advertising. The search engine’s recently launched “AI Overview” has increased engagement, and a new advertising platform has increased conversions or ad buyers.

Investor’s Business Daily has named Alphabet an AI stock to watch, giving it a best-possible 99 out of 99 growth rating. Yahoo Finance believes that Alphabet’s stock is trading significantly below its value, and models suggest profits will grow over the next few years.

Amazon

Amazon is a FAANG and MAMAA mainstay for a reason. Its market cap is among the highest in the world, partially thanks to the revenue-generating Amazon Web Services. AWS sales are more than twice Google’s and $6 billion more than Microsoft Azure’s.

Amazon shares hit a record high in early May, gaining close to 1% in a single day. Despite slight declines since then, the company may be on its way to joining the $2 trillion market cap club.

Unfortunately, Amazon’s dominance has made its stocks relatively expensive. Share profits could take a severe hit if Amazon’s growth falls short of expectations. Yahoo Finance calls this stock a pass.

Apple

According to Investor’s Business Daily, Apple has been facing some struggles as of late. It has lagged behind competitors in AI strategy, it’s seeing weak iPhone sales in the U.S. and China, and it’s facing some legal issues. Though Apple did unveil its new AI strategy on June 10, so things could be looking up in that area.

Apple was the first company to have a market cap of $3 trillion, though it’s since been passed by Microsoft. Its market cap currently stands at $2.96 trillion.

Investor’s Business Daily gave Apple an 83 composite rating, noting that the best growth stocks have a composite rating of at least 90. So Apple is lagging here. Currently, Investor’s Business Daily claims Apple’s stock is not a good buy. However, it advises keeping an eye on the market, as that could change. According to MarketWatch, 20 analysts rate Apple a “Buy,” 11 gave it an “Overweight” rating and 14 rate it a “Hold.”

The Bottom Line: Which FAANG and MAMAA Stocks Are Worthwhile?

The six stocks in FAANG and MAMAA are all big-time market players. Here’s a quick review.

  • Amazon is still the giant of e-commerce, but it’s costly, and investors might pay for that cost if it doesn’t keep growing.

  • Google keeps getting bigger, and its investments in crucial areas like advertising and AI continue to pay off.

  • Meta is doing well but is taking some business risks that might not pan out.

  • Microsoft boasts stability and growth potential, but it might be a slow-and-steady kind of growth.

  • Netflix still needs to catch up in value, but it’s growing, and investors are excited.

  • Apple has faced some struggles as of late, but it’s still a market giant with upside potential.

The decision of which to buy depends on your budget and risk tolerance. Microsoft might be your top buy if you put your faith in market cap. If you’re a semi-underdog person, Netflix might be your choice. There’s no one correct answer, but these six giants remain strong contenders.

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This article originally appeared on GOBankingRates.com: FAANG vs. MAMAA Stocks: How They’re Different and What To Know Before Investing