Analysis-Wavering ‘Magnificent Seven’ draw bargain-hunters amid U.S. stock sell-off
By Lewis Krauskopf
NEW YORK (Reuters) — A slide in the shares of the massive U.S. technology and growth companies that have led stocks higher this year is tempting investors hoping for bargains ahead of results from market bellwether Apple.
Surging bond yields and mixed earnings reports have weighed on the so-called Magnificent Seven stocks, which are collectively down an average of about 15% from their 52-week highs, though they all still sit on hefty gains for the year.
As their stock prices have fallen, rich valuations are moderating. The stocks now trade at an average forward price-to-earnings ratio of about 30 times compared with 45 times in mid-June.
Some market participants see an opportunity. Shares of the Magnificent Seven — Apple, Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Nvdia, Meta Plaforms and Tesla (NASDAQ:TSLA) — have soared over the last decade, and now many are drawing investors with rock-solid balance sheets that many believe can weather rocky economic times.
“They are the highest quality names out there and, frankly, if we do go into a recession next year… I actually think the Magnificent Seven will hold up better,” said King Lip, chief strategist at Baker Avenue Wealth Management.
Because the Magnificent Seven have a combined weighting of 28% in the S&P 500, their performance holds a large sway over the broader index. The S&P 500 has fallen 9% from its 2023 high reached in late July, though it is still up just over 9% year-to-date.
Lip said his firm owns shares of all seven companies and has recently added to its holdings in some of them.
Others have been buying as well. Tech stocks saw $2 billion of net inflows last week, their largest in about two months, analysts
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