The Magnificent 7 are almost as big as… Gold!!
Source. Jeroen Blokland, True Insights
Expensive for a reason...
Since December 2019, the Magnificent 7 stocks collectively delivered a 28% annualized return. Of this, approximately 27% is attributable to earnings growth (21% sales growth and 6% margin expansion) with only 1% due to multiple expansion. In contrast, earnings drove only 13% of the S&P 500’s 17% annualized return since 2019. Looking forward, Goldman expect revenue growth will be the key driver of returns for the Magnificent 7 stocks. Bottom-up consensus expects the seven companies will collectively grow sales at a 12% CAGR through 2026 compared with an 3% CAGR for the remaining 493 companies in the S&P 500 index.
$TSLA is the only Magnificent 7 Stock to be in the red over the last 12 months.
Not only that, Tesla is getting absolutely trounced by the rest of the group. Should we rename this group the Magnificent 6 going forward? Source: barchart
To put things into perspective
Assuming Nvidia meets estimates, the Mag 7 generated $523bn in sales during 4Q, +14%YoY. Revenue growth for remaining 493 S&P 500 stocks was a comparatively paltry 2%. Margins for the mag 7 expanded by ~750 bp YoY to 23% vs. a 110 bp contraction to 9% for remaining 493 stocks in the S&P 500, Goldman has calculated. Source: HolgerZ, Goldman Sachs
Friday's market action tells a lot about what's currently going on
1) US large-caps equities index recorded strong gains ($SPX +1.07%; $NDX +1.69%) thanks to huge advance by $META (+20%) and $AMZN (+7%); 2) Underneath the surface, there is some selling taking place - the S&P 500 equally weight is DOWN -0.08% on the day. We need to see decent market breath for the equity bull market extend as the mag7 (or rather the "mag 4" as leadership is even more narrow than in 2023) will not be able to carry the market forward for ever... Source: Bloomberg
sp500 companies excluding magnificent seven.
Source: Daniel Lacalle
