Could these ASX shares be the new FAANG stocks on the block?

A new era of FAANG could be dawning upon us.

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Key points

  • The definition of FAANG could be changing, Merrill Lynch submits 
  • Shifting macro-climates means that tech shares are no longer the darlings of global stock markets 
  • Instead, it could be an-all commodities, fuels and renewables affair, the firm says 

Analysts at US investment bank Merrill Lynch have redefined the FAANG basket of stocks.

Formerly – and currently – the group was made up of Facebook, Apple, Amazon, Netflix and Google – the tech darlings of the NYSE and Nasdaq.

This group has provided investors with unparalleled returns over the past decade, positioning themselves as the biggest companies to ever walk the global stock markets.

TradingView Chart

FAANG 2.0? What’s it look like?

Up until now, the group has been the major floatation device for the US (and quite arguably, global) stock exchange(s).

Some quick analysis enables us to easily see just how much this is so. The performance of the S&P 500 from 2013–2022 has seen it climb to record heights, even through a pandemic, and flash crash of 2018.

However, stripping out the FAANG group sees incredibly different results, Ed Yardeni of Yardeni Research explains.

Yardeni show’s us a chart displaying the market cap of the S&P 500 – with and without the FAANG basket included – to highlight the index wouldn’t have performed nearly as well if it weren’t for these 5 tech juggernauts.

Plus, with a shifting macroeconomic narrative, that’s sending a blitzkrieg of geopolitical, inflationary and rates-based missiles at global markets, tech shares have taken an absolute beating in 2022.

The S&P/ASX All Technology Index (ASX: XTX) is down 19% this year to date and is the worst performing Aussie sector.

Perhaps that’s why Merrill are shifting their posture; in order to dance in tune with the emerging trends in commodities, energy and food production.

“The original FAANG acronym was made up of company-specific tech leaders that enjoyed sustained growth over the last decade as the economy increasingly digitalised—and then thrived—over the pandemic (and added $3.2 trillion in market cap),” it wrote in a recent note.

“[O]ur version of FAANG 2.0 reflects a new world of geopolitical risks and resource/hard asset intensity.”

Instead, Merrill lists its own pockets of the market where it “find[s] future value given the defining market rotations [it] expect[s].”

That consists of Fuels, Aerospace & defence, Agriculture, Nuclear/renewables and Gold/metals/minerals, to produce FAANG 2.0.

So what ASX shares have conformed to this latest definition? Considering the current macro trends, there’s been plenty.

Shares in agriculture player Graincorp Ltd (ASX: GNC) are up 18% this year to date, bringing an 81% gain for the last 12 months. Meanwhile, hydrocarbons giant Woodside Petroleum Limited (ASX: WPL) shares are up 47% this year to date to cover off fuels.

Gold shares have spiked hard in 2022 as well, with Bellevue Gold Ltd (ASX: BGL) spiking 14% since January for instance, whilst small-cap player Droneshield Ltd (ASX: DRO) has spiked 28% in the aerospace field.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Motley Fool contributor Zach Bristow owns Alphabet (A shares). The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Alphabet (A shares), Amazon, Apple, DroneShield Ltd, Meta Platforms, Inc., and Netflix. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Alphabet (C shares) and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, DroneShield Ltd, Meta Platforms, Inc., and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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