Is it still a good idea to buy the “Magnificent 7”? Are there other alternatives? This is what is being debated among managers of large investment portfolios.
Without a doubt, 2023 will remain in investors’ memories due to the strong stock market gains recorded by the group of technology stocks named by the market as “The Magnificent 7” (Apple, Microsoft, Amazon, Alphabet, Netflix, Nvidia and Tesla) that also ended up boosting the rest of the market, masking the poor performance of the majority of the members of the S&P 500. But now investors are wondering if this will continue or is it better to look at other alternatives in 2024.
For the moment this “Techno G7” maintains the tone and climate on Wall Street, especially due to the growing bets on businesses linked to artificial intelligence (AI) and also due to the good business results. But, under the magnifying glass of the renowned Jim Cramer and his “Mad Money” on the financial channel CNBC, there is still light after the tunnel by looking at other companies that seem to offer good returns. This influential analyst recognizes that The “tech G7” defines the direction of the market since it is about mega-cap companiesbut nevertheless considers that it is worth paying attention to other papers that can even provide greater returns than a “AAA” investment (very low risk) such as a simple fixed-term deposit in the US.
In this regard, he highlighted some values that have already registered gains of 10% or more in recent days. This is the case, for example, of XPO Logistics, an American transportation company, whose shares flew after showing net profits of $58 million in the fourth quarter of 2023 when a year ago it had recorded losses of $94 million. For Cramer, the company took advantage of a competitor’s bankruptcy and had a solid increase in truck loads, leading XPO to announce that it plans to continue investing in its network and expanding its service offerings.
Another case “uncovered” by Cramer is that of Monolithic Power, which is dedicated to chip manufacturing and with a strong focus on AI. This paper rose sharply in the last quarter of last year, challenging the giants of the sector such as Broadcom, Arm, or the company itself. Nvidia.
Another sector that is on Cramer’s agenda is that of infrastructure how to be Advanced Drainage Systemsthe largest manufacturer of high-density polyethylene pipes in the US, a growing sector that makes it easy to “make a difference.”
Cramer also recommends looking at stocks like biotech Regenxbiowhich are rising hand in hand with their innovations such as a possible treatment for Duchenne muscular dystrophy, a rare and serious disease.
The financial “influencer” points out that these new highs were not reached this far only through mega-capitalizations, but also thanks to movements such as those registered in recent days and not through money market bets. as a fixed term.
Days ago the Capital Group manager had warned about the danger of market concentration and the risk of the high valuations that G7 techno companies have reached. However, some colleagues considered that they did not present any excess valuation compared to the rest of the market since The group’s earnings percentage in the S&P 500 (less dividends) is more than 80% and they represent less than 30% of the index. The key is to see if the G7 tech can meet optimistic projections in an economy that is expected to slow this year and when central banks maintain the high cost of money.
In this regard, experts from Schroders believe that the Magnificent 7 have some challenges ahead of them, but also reasons for optimism: first of all, the generative artificial intelligence (AI) revolution, with the launch of ChatGPT in November 2022, created renewed enthusiasm for companies seen as AI winners. But they recommend analyzing each action separately, because grouping these companies as if they were a single group can create a false sense of similarity, given that although there is some overlap between their businesses, such as the rivalry in cloud services between Amazon, Google (Alphabet) and Microsoft, there are also huge differences between them. And secondly, it is worth remembering that large stock market capitalization can be justified by broad fundamentals.
Source: Ambito
