What Makes A Good FAANG Stock? - Ep. 531

Mar 28, 2020

This week, I’m talking about the FAANG stocks - these are the five most popular powerhouse American tech companies - Facebook, Amazon, Apple, Netflix and Google.

Yesterday, I talked about whether or not you’ve already missed the boat on investing in FAANG stocks with the returns up 1,433% over the last decade and if these stocks are a worthwhile investment to consider going forward. 

I didn’t give you a definitive answer, because the answer is different for each stock and its always changing. But there are principles that govern what makes a good stock, and that’s the topic of today’s tip. So whether it’s a FAANG stock or a completely different business, what are the qualities you should look for in any business before you invest?

Here are the boxes to check: 

1. Durable competitive advantage - ideally the business isn’t selling a commoditized product and has pricing power. There should be high barriers to entry as well where it’s not easy for any startup to come in and wipe them off the map. A competitive advantage for a strong business helps ensure future growth. 
2. Free Cash Flow is also a very important but more difficult metric to evaluate. Cash cow businesses that have strong, consistent cash flow have the ability to reinvest in the business 
3. Strong management team who is competent and capable 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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