You know the ‘Magnificent Seven’ stocks, right? Even if you know that, you may have trouble remembering all seven of them, just as I often struggle to name all seven of Snow White’s short-lived companions. So here they are:
They are called ‘magnificent’ in large part because of their great achievements over the years and decades. See for yourself:
Data source: Morningstar.com as of October 22, 2024.
To see? Amazing. (Remember that the S&P500 has achieved average annual gains of almost 10% for decades – and that’s hard to beat.)
The above numbers may depress you if you have owned none or many of the stocks in recent years. But don’t despair: it’s not too late to become a Magnificent Seven shareholder! Specifically, four out of seven appear attractive or moderately valued today.
Will the future returns of these stocks be as robust as those of the past? No one knows, and maybe not. But to each their own could produce parabolic returns – with the graphs of their performance going up sharply – most likely over a short period of time.
More importantly, even if they don’t achieve parabolic gains, the stocks below are likely to reward investors quite well over many years – and that’s more important than chasing parabolic gains.
You may be interested in owning Amazon stock because you’re familiar with the truly massive online marketplace and you’ve seen the delivery trucks driving around your neighborhood every day. But the company has a lot more to offer, especially Amazon Web Services, the leading cloud computing platform.
Despite its size, Amazon is still growing at double-digit rates while investing in artificial intelligence (AI) and other promising technologies. Third quarter revenue rose 11% year over year, while net profit fell 55%. With a recent forward-looking price-to-earnings (P/E) ratio of 34, well below the five-year average of 53, the stock appears attractively valued.
Metaplatforms (NASDAQ: META) used to be called Facebook, but changed the name to reflect that it is about much more than just Facebook. For example, it owns Instagram, Messenger and WhatsApp, and it has been busy investing in the development of technologies such as AI, on which it is spending billions. It has already implemented AI functionality into its social networking platforms, and CEO Mark Zuckerberg has said: “Meta AI is on track to be the most used AI assistant in the world by the end of the year.”
In Meta’s third quarter, revenue rose 19% year-over-year, while net profit rose 35%. The company noted that it had 3.3 billion daily active users on its platforms, up 5% year over year. That massive reach is one reason metaplatforms can continue to grow quickly, as they rake in money through online advertising and find other ways to generate revenue.
With a recent price-to-earnings ratio of 24, slightly above the five-year average of 21, the stock doesn’t seem to be valued at a bargain, but it does seem reasonably valued. So if you believe in its long-term potential, you can invest in it now – or add it to your watchlist, hoping for a price drop. Another option is to spend some of what you want to spend on Meta shares now and buy more shares later.
Alphabet is another Magnificent Seven stock investing heavily in AI, with dominant search engine Google now successfully integrating AI. However, Alphabet is more than just Google, it also includes YouTube, Fitbit, Nest and other companies.
Some worry that Alphabet could break up over antitrust concerns. But that may not happen, and if it does, it won’t necessarily be bad news for investors. Shareholders would likely receive shares of newly formed companies. Meanwhile, the company is growing rapidly and will likely continue to do so in the coming years. The impressive third quarter saw a 15% year-on-year revenue increase and a 34% net profit increase.
With a recent price-to-earnings ratio of 19, well below the five-year average of 23, the stock seems somewhat fairly valued. It’s not hard to see that it will grow strongly in the coming years, because it generates tons of money, is in a strong financial position and enjoys competitive advantages such as the network effect – with YouTube, for example, being so big that making videos look so good stand for. producers will share videos with a large audience.
Then there’s Microsoft, another multifaceted company that includes the seemingly ubiquitous Office productivity software, the Azure cloud computing platform, the Xbox gaming platform, and the Windows operating system. Microsoft is also – yes, you guessed it – well-positioned to benefit from the growth of AI, having invested billions in ChatGPT maker OpenAI and incorporating AI into many of its offerings.
Microsoft is yet another colossus that manages to grow quickly. In the quarter ended September 30, sales rose 16% year-on-year, while net profit grew 11%. It exceeded expectations, but management’s expectations for the coming quarter disappointed some. With a recent price-to-earnings ratio of 31, close to the five-year average of 30, Microsoft appears attractively valued.
So consider investing in (or holding) one or more of these Magnificent Seven stocks, as they can help guide your portfolio to greater results in the long term. They can even produce parabolic returns over some short periods of time.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Amazon: If you had invested $1,000 when we doubled in 2010, you would have $23,446!*
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Apple: If you had invested $1,000 when we doubled in 2008, you would have $42,982!*
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Netflix: If you had invested $1,000 when we doubled in 2004, you would have $428,758!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns November 4, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Will These 4 ‘Magnificent Seven’ Tech Stocks Go Parabolic? Why you might win even if they don’t. was originally published by The Motley Fool
