One reason for the popularity of the FAANG stocks is the enormous amount of cash those companies have.
To explain, FAANG stands for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google (GOOG). Five of the most prominent and cash-rich Big Tech companies.
Interestingly, the acronym FAANG is no longer accurate. Google is now Alphabet (GOOGL) while Facebook has become Meta Platforms Inc (NASDAQ: FB). However, the companies are still successful, fast growing, and cash rich.
The FAANG has enormous amounts of Cash
Investors love the FAANG companies because they accumulate enormous amounts of cash.
For example, Meta had $58.270 billion cash and short-term investments on 30 September 2021. Alphabet had $142.003 billion cash and short-term investments on the same day. Amazon had $79.224 billion in cash and short-term investments on 30 September 2021. Apple had $62.639 billion in cash and short-term investments. The least cash-rich of the FAANG, Netflix had $7.527 billion in cash and short-term investments on 30 September 2021.
Therefore, I calculate all the FAANG companies had $349.663 billion in cash and short-term investments on 30 September 2021. Thus, five companies had over a quarter trillion dollars in cash on 30 September 2021.
Thus, I think the real reason people invest in the FAANG is cash. All five companies have enormous amounts of cash and buying power. Additionally, all five companies can borrow enormous amounts of money by using that cash as collateral.
How Much Cash can the FAANG generate?
Not all the FAANG can generate enormous amounts of cash. For example, Netflix reported a quarterly operating cash flow of $82.38 million and a quarterly ending cash flow of -$251.65 million on 30 September 2021.
However, Netflix can generate enormous amounts of cash. For example, Netflix reported a quarterly ending cash flow of $8.436 billion on 31 March 2021.
In contrast, Apple reported a quarterly operating cash flow of $20.20 billion and an ending cash flow of $653 million on 30 September 2021. Interestingly, Apple reported a quarterly ending cash flow of $37.719 billion on 31 December 2021. There was also a $38.763 billion quarterly operating cash flow on 31 December 2021.
Meanwhile, Amazon reported a quarterly operating cash flow of $7.313 billion, but a quarterly ending cash flow of-$10.49 billion on 30 September 2021. Additionally, Amazon reported a quarterly operating cash flow of $34.155 billion on 31 March 2021.
Alphabet reported a quarterly operating cash flow of $25.539 billion and an ending cash flow of $89 million on 30 September 2021. Alphabet reported a quarterly ending cash flow of $26.622 billion on 31 March 2021.
So yes, the FAANG can generate enormous amounts of cash. However, I think there are excellent alternatives to FAANG out there.
Why I dislike the FAANG Stocks
I dislike the FAANG stocks because they are expensive and offer just one dividend.
For example, Mr. Market paid $336.35 for Meta Platforms on 31 December 2021. Additionally, he paid $2,897.04 for Alphabet Class A (NASDAQ: GOOG), and $3,334.34for Amazon (AMZN) on the same day. Additionally, Mr. Market paid $602.44 for Netflix (NFLX) on 31 December 2021.
The only FAANG I consider fairly priced is Apple. Mr. Market paid $177.57 for Apple (AAPL) on 31 December 2021.
Interestingly, Apple is the only FAANG that pays a dividend. Appealingly, Apple will pay four 22¢ dividends in 2022. Overall, Apple shares offered a 88¢ forward dividend and a 0.50% dividend yield, on 31 December 2021.
My advice is to avoid all the FAANGS but Apple (AAPL). I consider Apple the only value investment among the FAANGs.
An Alternative to the FAANG, the NAMPOF
I think a group of stocks I call the NAMPOF, or NAMPOM, is an excellent alternative to the FAANG.
The original NAMPOF comprised NVIDIA (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), PayPal (NASDAQ: PYPL), Oracle (NYSE: ORCL), and Facebook (NASDAQ: FB).
The NAMPOM comprises NVIDIA (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), PayPal (NASDAQ: PYPL), Oracle (NYSE: ORCL), and Meta Platforms (NASDAQ: FB).
Meet the NAMPOM, a FAANG Alternative
Here are the NAMPOM stocks:
The first NAMPOM is the chip maker NVIDIA Corporation (NVDA) is cash-rich and pays a dividend. NVIDIA had $19.298 billion had cash and short-term investments on 31 October 2021. Plus, NVIDIA will pay four 4¢ quarterly dividends in 2022. NVIDIA offered a 16¢ forward dividend a 0.05% forward dividend yield on 31 December 2021. Mr. Market paid $294.11 for NVIDIA on 31 December 2021.
The second NAMPOM is our old friend Apple Inc. (AAPL). Apple had $62.639 billion in cash and short-term investments on 30 September 2021. Yet Mr. Market paid $176.28 for it on 23 December 2021. Plus as we noted above, Apple will pay four 22¢ dividends in 2022. Overall, Apple shares offered a 88¢ forward dividend and a 0.50% dividend yield on 31 December 2021.
The third NAMPOM is Microsoft (MSFT). Microsoft had $130.615 billion in cash and short-term investments on 30 September 2021. Yet, Mr. Market paid $336.32 for Microsoft on 31 December 2021. Microsoft will pay four 62¢ quarterly dividends in 2022. Overall, Microsoft offered a forward dividend of $2.48 and a forward dividend yield of 0.74% on 31 December 2021.
The fourth NAMPOM is PayPal Holdings Inc (PYPL). PayPal had $13.292 billion in cash and short-term investments on 30 September 2021. Yet Mr. Market paid $188.58 for PayPal on 31 December 2021. PayPal pays no dividend.
The fifth NAMPOM is the financial software giant Oracle Corporation (ORCL). Oracle had $22.838 billion in cash and short-term investments on 30 November 2021. Yet Mr. Market paid just $87.21 for Oracle on 31 December 2021. Oracle will pay four 32¢ quarterly dividends in 2022. Oracle offered a $1.28 forward dividend and a 1.47% forward dividend yield on 31 December 2021.
The sixth NAMPOM is Meta Platforms Inc (FB), the company formerly known as Facebook. Meta had $58.47 billion in cash and short-term investments on 30 September 2021. Mr. Market paid $336.35for Meta on 31 December 2021 but pays no dividends.
NAMPOM benefits
I think the NAMPOM is superior to the FAANG because it offers enormous amounts of cash and dividends. For instance, I calculate all the NAMPOM companies had $307.152 million in cash and short-term investments on 31 December 2021.
In addition, the NAMPOM offered $1.20 in quarterly dividends on 31December 2021. NAPOM also offered $4.80 in forward annual dividends on 31 December 2021.
Hence, NAPOM is a better choice for those who prefer cash and dividends to growth. I advise all investors to investigate both NAMPOM and FAANG and choose wisely.
Originally published at https://marketmadhouse.com on December 31, 2021.
