Why 2020 Is Going to Create the “New FANG Stocks”

The "New FANG Stocks" Are Set to Dominate Tech in 2020 and Beyond2020’s Top Tech Stocks

For years now, we’ve seen the same old names dominate the conversation when it came to the top tech stocks. The FANG stocks—Facebook, Inc. (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix Inc (NASDAQ:NFLX), and Google, aka Alphabet Inc (NASDAQ:GOOG)—typically were ascendant.

Meanwhile, many companies, ranging from social media giants like Snap Inc (NYSE:SNAP) to wearable tech companies like Fitbit Inc (NYSE:FIT), all claimed to be among the new generation of high-value tech stocks. Yet none of them have been able to challenge the FANG stocks.

The top tech stocks in 2020 may soon change that.

You see, in the past, one of the problems that certain tech companies have faced is that they were, ultimately, based on gimmicks.

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Fitbit stock has tanked hard since its initial public offering (IPO) because, well, you buy one Fitbit device and you don’t really need another one for a long while. Snap stock, meanwhile, has since bounced back from its horrid start, but it too was based on a gimmick: “Snapchat,” a social media app where pictures were impermanent.

Going against giants like Facebook simply wasn’t good enough. After all, Facebook was able to effectively ape Snapchat’s most unique features and, in some ways, implement them better on its subsidiary, “Instagram.”

So what are the major flaws of these two types of companies? Gimmicks, yes, but they were also getting into crowded markets with heavy competition. The top tech stocks of 2020 are doing the opposite: they’re carving out their own markets from which they can grow in perpetuity.

Think about it. Before last year, there was not a single meat-alternative stock. And now we have a multi-billion-dollar company, Beyond Meat Inc (NASDAQ:BYND), dominating the news. That’s because Beyond Meat did something simple, something that many tech stocks that overpromised but undelivered forgot to do: innovate.

The reason that tech stocks inspire such excitement is that innovative quality. Disruption and all that clichéd jargon repeated ad nauseum has a purpose: it speaks to the ability for a product to come in and, with great speed, create massively popular markets.

Social media has taken less than two decades to dominate the world. The same goes for online marketplaces, smartphones, and streaming services.

Before these specific markets existed, companies came in and erected great empires from the ground up. When that type of massive growth takes place, you better believe that immense profits can be made by savvy investors.

And that brings us to why the top tech stocks in 2020 are so damn exciting: they’re innovating.

The “New FANG Stocks”

Trying to topple the dominant class of tech stocks, the FANG stocks, is not going to be easy. But the new class of tech stocks we’re seeing in 2020 is the first time in a long while I feel they’re up to the task. That’s because the market sizes are massive.

For meat-alternative companies, we’re talking potentially hundreds of billions of dollars in future market size.

Beyond Meat saw its sales grow 287% year-over-year in its 2019 second quarter, and Wall Street has projected that its 2020 full-year sales will total more than $420.0 million, up by about 60% year-over-year. (Source: “Beyond Meat Stock Dropped Because Serious Competition Is Closing In — Fast,” Barron’s, October 17, 2019.)

With 5G stocks, we’re also seeing projections for hundreds of billions of dollars in profits in the near future.

And the biggest of the new technologies set to dominate in 2020 and beyond is artificial intelligence (AI). AI stocks are likely to account for a trillion-dollar market cap. That’s right, “trillion” with a “T.”

And that’s what makes stocks operating in these sectors specifically (especially newer companies) so fascinating. We could be witnessing the beginnings of a massive paradigm shift in the stock market. And when these kinds of shifts take place, near-boundless profits are at stake.

Many of the FANG stocks did not rise to prominence overnight. Consider that Facebook and Netflix didn’t even exist a few decades ago. They were hugely innovative and young companies in emerging industries that went on to dominate the world (in this case, social media and streaming).

So, with the “new FANG stocks” coming onto the scene, we have a massive opportunity on our hands.

Many of the AI companies, for instance, could go public and either be acquired by larger tech companies (think Alphabet) or they could carve out their own place in the market. Both cases could send share prices soaring.

We could be sitting on the cusp of a mini tech revolution, in other words. We’ve been through these scenarios before, and when they hit, many investors end up grinning ear to ear as their portfolios swell with profits.

With so much hype surrounding companies that are operating in rapidly expanding, global markets, the potential for gains is hard to overstate.

Investors ought to pay careful attention to the “new FANG stocks” as they begin to crop up in 2020 and beyond. Choosing the right one could be like getting shares of Amazon or Facebook back when they first hit the market.

Analyst Take

The thing about the tech sector is that it’s not supposed to have monarchs. By its design and its focus on innovation, larger and more established companies are always meant to be overtaken and replaced by the nimbler, more exciting companies of tomorrow.

That cycle is supposed to repeat forever, with new companies innovating, developing new gadgets, and ascending to the top of the pack—only to be overtaken by even newer companies with even newer technologies.

As it stands, we haven’t seen too much movement in the ranks at the top of the tech stock market. The FANG stocks continue to dominate, surging to higher and higher prices (exceeding $1,000 per share) and netting trillion-dollar market caps.

But this environment, while seemingly prohibitive to smaller investors and companies alike, is actually rife with opportunity.

The big companies are getting older and slower, and newer technologies like AI and 5G have been emerging. Meanwhile, companies like Beyond Meat have been developing entirely new market segments and, in turn, have been soaring toward billion-dollar valuations.

All this culminates in a time of potentially massive change in the coming decade. And in that change, investors could stand to make a lot of money.