Will 2024 Be the Year of the Other 493 Stocks?

investing.com:

As we welcome in 2024, one of the most critical questions facing investors is which stocks and sectors will beat the market. Can the Magnificent 7 retain its crown? Or will some subset of the 493 other S&P 500 stocks and their neglected sectors take the throne in 2024?

The Magnificent 7 stole the show in 2023. As we wrote in December:

This year’s most popular investment bandwagon is the Magnificent 7, comprised of Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta.

The graphs below, courtesy of Goldman Sachs, and our table show these 7 stocks gained 71% this year to date, while the remaining 493 stocks added a mere 6%.

The outperformance pushed up their contribution to the S&P 500 to nearly 30%. Lastly, the sharp increase in stock prices led to even more extreme valuations for the group.

We ended the article as follows:

As we enter 2024, be open to the possibility that last year’s winners will not take the crown this year.

We don’t know what will replace the Magnificent 7 or when, but we will be sure to keep our bias in check and stay open to new ideas.

In the spirit of being open to new ideas, we study market valuations and earnings expectations to see if 2024’s Magnificent 7 includes names like Consolidated Edison (NYSE:ED), Johnson & Johnson (NYSE:JNJ), Kraft Heinz (NASDAQ:KHC), and other 2023 laggards.

Before we share our analysis, it’s worth emphasizing that changes in valuations, often called multiple expansion or contraction, can play an outsized role in the performance of a stock or index.

Regardless of changes to earnings, sales, or other fundamental data, investors’ desire to buy or sell, if strong enough, can divorce a stock’s price from its fundamentals.

For example, last year, the S&P 500 was