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Impressive Returns of 'FANG' Stocks
Jul 19, 2018

A look at the returns from the US tech giants tells a lot about the impact of technology.

They are popularly known as 'FANG' stocks - Facebook, Amazon, Netflix, and Google. Since listing, these stocks have given multifold returns to their shareholders.

One advantage for tech companies over other sectors is an interesting concept called the network effect.

In simple words, this means, as these companies grow and attract users, they become more beneficial to customers. This in turn makes them more popular and they attract even more users.

For example, users are likely to stick to Facebook since most of their contacts are there at one place and connectivity is easy. Same with Google where the more you search, the better the algorithm becomes and is more beneficial for future users.

This network effect has become a big economic 'moat' for these tech companies to ward off competition. Indian tech companies are slowly but surely taking advantage of this network effect. With their focus on acquiring more and more users, some are likely to develop large impenetrable moats that can last for a very long time.

Data Source: Yahoo Finance

This Chart Of The Day was published in The 5 Minute WrapUp - These Are the Best Stocks for the Next Decade

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