Here Is How to Play FAANG's Lacking Potential: ETF Spotlight

(Bloomberg) -- While FAANG stocks have recovered from losses following Facebook newsfeed changes last Friday, they’ve shown some weakness ahead of the group’s next test - Netflix Inc.’s fourth quarter earnings report on Monday.

The average return potential of FAANG stocks makes them appear expensive. Collectively, the shares are trading the closest to their target prices in more than five years, according to Bloomberg data.

But if you’re an investor still looking for ways to bet on these U.S. megacaps, there are several ETFs offering variety.

FAANG-Like ETFs

• PowerShares QQQ Trust Series 1 (ticker QQQ) has $61.6 billion in assets and is commonly used by investors as a tech play; among the fund’s top holdings are Apple Inc., Microsoft Corp., Amazon.com Inc. , Facebook Inc. and Google parent Alphabet Inc.; FAANG names make up 35.9 percent of QQQ’s exposure
  • QQQ is up 1.1 percent since last Friday
• First Trust Dow Jones Internet Index Fund (ticker FDN) has $5.9 billion in assets and holds Facebook, Amazon, Netflix and Google in its top holdings, which account for about 32 percent of the fund
  • FDN is up 0.4 percent since Friday vs the broader Technology Select Sector SPDR Fund (ticker XLK) which is up 0.7 percent
  • Of all the funds compared here, XLK has the highest exposure to Apple and Microsoft, and does not hold Netflix
• PowerShares NASDAQ Internet Portfolio (ticker PNQI) has $508 million in assets and has Netflix, Google, Amazon and Facebook among its top holdings, with overall FAANG exposure accounting for 32.2 percent of the fund
  • PNQI is up 0.3 percent since Friday
  • Of all the funds compared here, PNQI has the highest exposure to Netflix at 8.6 percent
• AdvisorShares New Tech and Media ETF (ticker FNG) has about $47 million in assets and boasts the highest exposure of the three ETFs to FAANG, it accounting for more than 37 percent of the portfolio; FNG also holds Apple, unlike its peers FDN and PNQI
  • FNG is up 0.3 percent since Friday

To contact the reporters on this story: Carolina Wilson in New York City at cwilson166@bloomberg.net, Brandon Kochkodin in New York at bkochkodin@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Morwenna Coniam

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