Focus for the Magnificent 7 stocks tends towards performance, valuation and earnings. But Goldman Sachs also notes reinvestment.
Tony Pasquariello, head of hedge fund coverage, says "the biggest of the big continue to demonstrate their considerable muscle on two key fronts: return-of-capital ... AND redeployment-of-capital."
Total capex and R&D for the group - Apple (AAPL), Amazon (AMZN), Alphabet (GOOG) (GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA). - is expected to be $348B.
Here’s "another way to frame it: the Magnificent 7 reinvests 61% of their operating free cash flow back into capex + R&D ... that’s tracking to be 3x the 493" of the S&P 500 (NYSEARCA:SPY) (IVV) (VOO), he said.
Goldman has earnings growth for the S&P in Q1 tracking +6% year over year, with the Magnificent 7 +48% and the 493 -2%.
Last year, the Magnificent 7 outperformed Russell 2000 (IWM) by a factor of 6x, Pasquariello added.
While "loving the former and disliking the latter, I didn’t think that degree of outperformance was sustainable" but year to date the mega caps are up 18% with the Russell is up 3%. |
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