SMART Stocks Are The New FANG

Summary

• FANG is an acronym coined in 2013 for the stocks of dominant American technology companies: Facebook, Amazon, Netflix and Google.
• They were later joined by Apple and turned into "FAANG" stocks. Even after seven years, they continue to generate alpha for investors who bought and held them all the way.
• Looking forward, new dominant technology companies have risen. They have trailblazing ecosystems, are disrupting their industries and leading the next wave of secular growth in technology.
• Using highly qualitative criteria (such as leadership, culture, TAM, microtrends, momentum), I make the case for a new acronym: SMART.
• SMART stocks are already Wall Street darlings and recognized for the superiority of their business. But I believe they could still deliver outstanding returns in the decade ahead.
• I do much more than just articles at App Economy Portfolio: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

It was back in February 2013.

At the time, CNBC's "Mad Money" host Jim Cramer introduced an acronym for stocks that represented the future. They had a dominant position in their market and strong momentum.

Those companies were Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOG) (GOOGL). He suggested that they had "the potential to really take a bite out of the bears." As a result, he called them FANG stocks.

How did FANG stocks do since then? They returned +507% on average as of this writing, compared to a mere +71% for the S&P 500 (SPY). That's +436% of alpha generated over seven years if you invested in a balanced basket of these four stocks.

FANG stocks - later re-branded as "FAANG" when Apple was added to the mix in 2017 - have remained outstanding performers, driving the Nasdaq 100 (QQQ) to a record-high recently.

While I own all FAANG stocks, I always wonder which companies truly represent the next wave of dominant technology companies that are likely to see their positions reinforced over the years and continue to outperform.

The same way FANG stocks were hidden in plain sight in 2013, I believe the next leading technology stocks are well known by most investors and already recognized by Wall Street for their superiority and the inherent underlying quality of their business.

The real challenge is not to find them. Anyone could have recognized the obvious superiority of Facebook, Amazon, Netflix and Google back in 2013. The real challenge is to buy them and hold them for many years.

This prompted me to offer a new acronym for five companies that represent the future of the digital economy. They are clearly dominant in their respective industries and likely to generate FANG-like returns in the decade ahead.

I call

Analyst’s Disclosure:I am/we are long AMZN ETSY FB GOOG MTCH NFLX ROKU SHOP SQ TTD TWLO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.