Earlier today, Academy's Peter Tchir confessed that he had finally reached a point where it was no longer possible to avoid discussing the "Magnificent 7" stocks (MSFT, AAPL, NVDA, TSLA, GOOGL, META and AMZN), something we discovered 4 months ago, when we first explained how the entire market rally of 2023 has been on the back of less than 10 stocks.
But while avoiding discussion of the 7 most important stock "generals" - which are responsible for a mindboggling $11 trillion in market capitalization - clearly became impossible long ago, that does not mean that one should just lump the seven constituents into the latest narrative (and price) bubble. Indeed, the disaggregation of the "magnificent 7" is the key question of the latest equity and quant strategy note (available to pro subs) by Bofa Chief equity strategist, Savita Subramanian, who writes that while the trotting out of reductive monikers is not new (remember the Nifty 50), the "Magnificent 7" underscores the challenge facing diversified equity strategies: "seven stocks, making up close to 11 trillion in market capitalization today, contributed 73% of returns of the S&P 500 in the first half of 2023, a crescendo to FANG, FAANMG and tech leadership."
But, as Savita notes, "it’s dangerous to lump seven companies together into a homogenous bubble that expands or collapses." She then explores the five most frequently asked questions on this topic together with her resplies, which we excerpt from below, but first, a brief snapshot of the key facts:
