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Magnificent Seven ETFs: A Review of 2023 & What Lies Ahead
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In the current investment landscape, the focus has shifted away from the FANG stocks, and a new set of influential stocks, known as the Magnificent Seven Stocks, has emerged. These stocks include Alphabet (GOOGL - Free Report) , Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) , Meta Platforms (META - Free Report) , Microsoft (MSFT - Free Report) , Nvidia (NVDA - Free Report) and Tesla (TSLA - Free Report) . These companies are considered the new leaders in the stock market.
These stocks have exposure to ETFs like Roundhill Magnificent Seven ETF (MAGS - Free Report) , Invesco S&P 500 Top 50 ETF (XLG - Free Report) , iShares S&P 100 ETF (OEF - Free Report) and Vanguard Mega Cap Growth ETF (MGK - Free Report) .
Dominance of the Magnificent Seven
The Magnificent Seven stocks have a significant impact on the Nasdaq index, as they collectively account for major portion of its total weighting. Unlike the price-weighted Dow Jones Industrial Average, both the Nasdaq Composite and the S&P 500 indexes are weighted based on market capitalization. This means that the combined market capitalization of these seven companies disproportionately influences the Nasdaq Composite and Nasdaq 100.
Nasdaq's Efforts to Address Concentration
To mitigate the concentration of the Magnificent Seven Stocks in the Nasdaq index, the Nasdaq conducted a rebalancing on Jul 24. This rebalancing aimed at reducing the individual weighting of these seven mega-cap stocks. However, even after the rebalancing, the collective influence of these stocks remains significant, with their total weighting decreasing only slightly from over 50% to nearly 50%.
Ongoing Market Trends
Despite recent fluctuations in the market, some of the Magnificent Seven Stocks, including Apple, Microsoft, Amazon, Google, Nvidia, and Meta, continue to exert a substantial impact on the tech-heavy Nasdaq index. Their performance plays a crucial role in influencing the index's overall direction.
Specific Stock Insights
Examining individual stocks within the Magnificent Seven reveals varying performance trends. For instance, Nvidia, Meta, Microsoft, Amazon and Tesla have all experienced recent breakouts in the stock market. However, Nvidia and Google have faced challenges, with their stock prices slipping below the key moving averages. Microsoft and Amazon remain in a buy range, while Nvidia and Meta are just below their recent buy points.
Apple's Position in the Market
Apple's performance in the market has been a subject of interest, with its post-earnings rally stalling due to soft iPhone sales data. Nevertheless, Apple's stock continues to set up a potential buy point at 192.93 in a cup-with-handle pattern, indicating ongoing market dynamics and investor sentiment toward the company's prospects, per Investors Business Daily.
A Bright 2024 Awaiting?
With the Fed expected to go slow on its rate hike spree in 2024 (or even cut rates in late 2024), big tech should do well as the space thrives better in a low-rate environment. Plus, the AI boom is continuing, which is expected to push the space to another height next year.
Inside the Valuation of Magnificent Seven
Meta’s P/E (ttm) is 30.16X, lower than Computer Software-Services Market’s P/E of 36.47X. Alphabet’s P/E (ttm) is 29.51X, lower than the concerned industry Computer Software-Services Market’s P/E. Microsoft’s P/E (ttm) is 33.65X, lower than the concerned industry Computer Software-Services Market’s P/E. Apple’s P/E (ttm) stands at 29.55X, in line with Computer-Office Equipment Market’s P/E of 28.24X.
However, Amazon, Tesla and Nvidia are pricey. Amazon’s P/E (ttm) is 94.91X, lower than Nonfood Retail-Wholesale market’s P/E of 26.97X. Tesla’s P/E (ttm) 68.75X is way higher than the concerned industry Autos-Tires-Trucks market’s P/E of 23.13X. Nvidia’s P/E (ttm) 96.56X is also much higher than the concerned industry Electronics-Semiconductors market’s P/E of 41.04X.
Risks to “Magnificent Seven” Investing
Big Tech grapples with three regulatory hurdles: Privacy, content oversight, and antitrust scrutiny. These tech giants face challenges in safeguarding user privacy, moderating content and addressing potential antitrust actions. Big Tech companies are currently under intense antitrust scrutiny, with regulators and lawmakers closely examining their market dominance and potential anti-competitive practices.
Meanwhile, privacy, a complex issue with numerous trade-offs, is progressing slowly on the legislative front. Companies are taking active self-regulatory measures, which can have a more disruptive impact on the industry than government regulations.
Content oversight of Big Tech companies involves monitoring user-generated content on their platforms, which is a big task given that billions of users post numerous content every day. Plus, government regulations can also go against the big tech companies’ revenues.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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Magnificent Seven ETFs: A Review of 2023 & What Lies Ahead
In the current investment landscape, the focus has shifted away from the FANG stocks, and a new set of influential stocks, known as the Magnificent Seven Stocks, has emerged. These stocks include Alphabet (GOOGL - Free Report) , Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) , Meta Platforms (META - Free Report) , Microsoft (MSFT - Free Report) , Nvidia (NVDA - Free Report) and Tesla (TSLA - Free Report) . These companies are considered the new leaders in the stock market.
These stocks have exposure to ETFs like Roundhill Magnificent Seven ETF (MAGS - Free Report) , Invesco S&P 500 Top 50 ETF (XLG - Free Report) , iShares S&P 100 ETF (OEF - Free Report) and Vanguard Mega Cap Growth ETF (MGK - Free Report) .
Dominance of the Magnificent Seven
The Magnificent Seven stocks have a significant impact on the Nasdaq index, as they collectively account for major portion of its total weighting. Unlike the price-weighted Dow Jones Industrial Average, both the Nasdaq Composite and the S&P 500 indexes are weighted based on market capitalization. This means that the combined market capitalization of these seven companies disproportionately influences the Nasdaq Composite and Nasdaq 100.
Nasdaq's Efforts to Address Concentration
To mitigate the concentration of the Magnificent Seven Stocks in the Nasdaq index, the Nasdaq conducted a rebalancing on Jul 24. This rebalancing aimed at reducing the individual weighting of these seven mega-cap stocks. However, even after the rebalancing, the collective influence of these stocks remains significant, with their total weighting decreasing only slightly from over 50% to nearly 50%.
Ongoing Market Trends
Despite recent fluctuations in the market, some of the Magnificent Seven Stocks, including Apple, Microsoft, Amazon, Google, Nvidia, and Meta, continue to exert a substantial impact on the tech-heavy Nasdaq index. Their performance plays a crucial role in influencing the index's overall direction.
Specific Stock Insights
Examining individual stocks within the Magnificent Seven reveals varying performance trends. For instance, Nvidia, Meta, Microsoft, Amazon and Tesla have all experienced recent breakouts in the stock market. However, Nvidia and Google have faced challenges, with their stock prices slipping below the key moving averages. Microsoft and Amazon remain in a buy range, while Nvidia and Meta are just below their recent buy points.
Apple's Position in the Market
Apple's performance in the market has been a subject of interest, with its post-earnings rally stalling due to soft iPhone sales data. Nevertheless, Apple's stock continues to set up a potential buy point at 192.93 in a cup-with-handle pattern, indicating ongoing market dynamics and investor sentiment toward the company's prospects, per Investors Business Daily.
A Bright 2024 Awaiting?
With the Fed expected to go slow on its rate hike spree in 2024 (or even cut rates in late 2024), big tech should do well as the space thrives better in a low-rate environment. Plus, the AI boom is continuing, which is expected to push the space to another height next year.
Inside the Valuation of Magnificent Seven
Meta’s P/E (ttm) is 30.16X, lower than Computer Software-Services Market’s P/E of 36.47X. Alphabet’s P/E (ttm) is 29.51X, lower than the concerned industry Computer Software-Services Market’s P/E. Microsoft’s P/E (ttm) is 33.65X, lower than the concerned industry Computer Software-Services Market’s P/E. Apple’s P/E (ttm) stands at 29.55X, in line with Computer-Office Equipment Market’s P/E of 28.24X.
However, Amazon, Tesla and Nvidia are pricey. Amazon’s P/E (ttm) is 94.91X, lower than Nonfood Retail-Wholesale market’s P/E of 26.97X. Tesla’s P/E (ttm) 68.75X is way higher than the concerned industry Autos-Tires-Trucks market’s P/E of 23.13X. Nvidia’s P/E (ttm) 96.56X is also much higher than the concerned industry Electronics-Semiconductors market’s P/E of 41.04X.
Risks to “Magnificent Seven” Investing
Big Tech grapples with three regulatory hurdles: Privacy, content oversight, and antitrust scrutiny. These tech giants face challenges in safeguarding user privacy, moderating content and addressing potential antitrust actions. Big Tech companies are currently under intense antitrust scrutiny, with regulators and lawmakers closely examining their market dominance and potential anti-competitive practices.
Meanwhile, privacy, a complex issue with numerous trade-offs, is progressing slowly on the legislative front. Companies are taking active self-regulatory measures, which can have a more disruptive impact on the industry than government regulations.
Content oversight of Big Tech companies involves monitoring user-generated content on their platforms, which is a big task given that billions of users post numerous content every day. Plus, government regulations can also go against the big tech companies’ revenues.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)