3 ETFs to bet on a FAANG comeback

Remember when FAANG (Facebook, Apple, Amazon, Netflix, & Google) used to be a thing? Apparently, it turned into FANGMA (Facebook, Apple, Netflix, Google, Microsoft, and Amazon). Or MANGMA, now that Facebook is called Meta. Or just AGMA, now that Meta and Netflix have tumbled in share price. 

The point is, despite recent hiccups around earnings misses and slowing revenue growth, these stocks still dominate numerous U.S. market-cap weighted indexes. For the NASDAQ 100 and S&P 500, many of these stocks can still be found in the top 10 holdings. 

For investors eager to "buy the dip" now that their valuations have come down, using an ETF can be a great way of over-weighting these stocks while still ensuring some degree of diversification. Naturally, you would think that a technology ETF is the best option, right?

The problem with this approach is that some stocks like Google might be excluded. This is because Google is technically classified as a communication sector stock. That's right – the tech giant actually belongs in the same cohort as boring old Verizon and AT&T. 

On the other hand, my three ETF picks today guarantee exposure to all the FAANG stocks in a single ticker and ensures they're all weighted heavily in the top holdings. Let's look them over.

Invesco QQQ Trust (QQQ) / Invesco NASDAQ 100 ETF (QQQM)

Both QQQ and QQQM track the NASDAQ 100, a market-cap weighted index of the largest 100 non-financial sector stocks listed on the NASDAQ exchange. In recent years, it's become dominated by FAANG stocks and is heavily overweighted to the technology sector at 50%. 

Currently, Apple is the largest holding in QQQ and QQQM at 13.1%, followed by Microsoft at 10.2%, Amazon at 5.5%, both classes of Google shares at 6.6% combined, Meta at 2.1%, and Netflix at 1.2%. Every stock except Netflix ranks among the top 10 holdings of QQQ and QQQM.

QQQ is the more popular ETF, with very high assets under management and daily traded volume. It also offers a well-developed options chain. QQQM is the lower cost version suitable for buy and hold investors. It has an expense ratio of 0.15% versus QQQ at 0.20%. 

Vanguard Mega Cap Growth ETF (MGK)

All the FANGMA stocks currently or at one point fell into the category of mega-cap growth stocks as they either have or had market capitalization over $200 billion and strong earnings growth. A lower cost alternative to QQQ and QQQM is MGK, which tracks mega-cap growth stocks. 

MGK currently has 96 holdings, with Apple dominating at 17%, followed by Microsoft at 12.6%, Amazon at 6.41%, Google at 7.7%, Meta at 1.6%, and Netflix at just 0.96%. Like QQQ and QQQM, technology stocks account for 50% of its index, the CRSP US Mega Cap Growth Index.

The main benefit of MGK is its low expense ratio. Like many of Vanguard's ETFs, MGK has low fees, charging an expense ratio of 0.07% right now. Given its similar holdings and performance compared with QQQ/QQQM, a good use for MGK might be as a tax-loss harvesting pair. 

SPDR Portfolio S&P 500 Growth ETF (SPYG)

Some investors might not like how QQQ or QQQM excludes financial sector stocks, or how MGK holds stocks from outside the S&P 500. For those investors, SPYG might be ideal. Its holdings are essentially the "growth" half of the S&P 500, selected for sales and earnings growth. 

Right now, SPYG currently holds 242 stocks. Once again, Apple is the largest holding at 14.1%, followed by Microsoft at 11.7%, Amazon at 5.4%, Google at 7.1%, Meta at 1.60%, and Netflix at 0.81%. SPYG is still overweighting the technology sector at 44% of its underlying holdings. 

Because SPYG only holds growth stocks, its distribution yield is quite low at just 0.95%, making it a very tax-efficient holding. An investor could split up the S&P 500 for tax-efficiency by holding SPYG in a taxable account while holding its value counterpart in a tax-sheltered account.

Disclaimer: This article is limited to the dissemination of general information pertaining to investment strategies and financial planning and does not constitute an offer to issue or sell, or a solicitation of an offer to subscribe, buy, or acquire an interest in, any securities, financial instruments or other services, nor does it constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment.