The “Magnificent Seven”: Stocks That Keep Delivering Strong Returns

Can you name all seven “Magnificent Seven” stocks? Just like recalling the names of Snow White’s seven companions, it can be tricky. Here’s the rundown:

These stocks earned the “magnificent” label due to their impressive performance over the years. Take a look at their returns:

Data source: Morningstar.com as of Oct. 22, 2024.

These returns speak for themselves. To put it in perspective, the S&P 500 has averaged annual returns of nearly 10% over decades — a tough benchmark to surpass.

Image source: Getty Images.

Seeing these numbers might be disheartening if you haven’t invested in these stocks recently. However, you still have the opportunity to join the ranks of Magnificent Seven shareholders, as four of these stocks are currently attractively priced.

Will Returns Continue to Soar?

Can we expect future returns from these stocks to match their remarkable past? While no one has the answers, there’s potential for significant gains ahead. The upward trends of their graphs may continue, particularly in the short term.

Even if these stocks don’t achieve parabolic gains, they’re likely to reward investors well over the long haul — a goal far more valuable than merely chasing rapid returns.

Spotlight on Amazon

Amazon’s exceptional online market presence is likely familiar to many, especially given the sight of its delivery trucks daily. Yet, the company’s offerings extend far beyond this, particularly with Amazon Web Services, its dominant cloud computing platform.

The giant continues to grow at double-digit rates while investing in new technologies, such as artificial intelligence (AI). In the third quarter, Amazon’s revenue increased by 11% year-over-year, and net income surged by 55%. With a current forward price-to-earnings (P/E) ratio of 34, significantly lower than its five-year average of 53, the stock appears appealingly valued.

Meta Platforms: More Than Just Facebook

Meta Platforms (NASDAQ: META) transformed from being just Facebook to a multi-faceted tech company. Alongside Facebook, it owns platforms like Instagram, Messenger, and WhatsApp, and is heavily invested in AI development, spending billions in pursuit of these technologies.

In its most recent quarter, Meta reported a revenue increase of 19% compared to last year, along with a 35% rise in net income. With 3.3 billion daily active users, Meta’s extensive reach is a key factor in its growth through online advertising and other monetization strategies.

The current forward P/E of 24 is slightly above its five-year average of 21, indicating that while the stock isn’t a bargain, it remains reasonably valued. If you believe in its potential, you might consider buying now or waiting for a better price to emerge.

Alphabet: More Than Google

Alphabet, parent company of Google, is pouring resources into AI technology. The company includes businesses like YouTube, Fitbit, and Nest along with its search engine.

While there are concerns about possible antitrust actions, which could lead to a breakup, this isn’t necessarily a cause for alarm for investors, as shareholders would likely benefit from any newly formed entities. In the meantime, Alphabet experienced strong growth, with a revenue increase of 15% in the third quarter and net income up 34%.

With a forward P/E of 19, lower than its five-year average of 23, the stock seems fairly valued while poised for robust future growth fueled by its sizable cash flow and competitive advantages, like YouTube’s widespread popularity.

Microsoft: A Versatile Powerhouse

Microsoft stands out as another versatile company, with products like Office, Azure cloud services, Xbox, and Windows. Microsoft is also well-positioned to benefit from AI growth, having invested billions in OpenAI, the creator of ChatGPT, and incorporating AI into its product offerings.

In the latest quarter, Microsoft reported a 16% year-over-year revenue increase and an 11% increase in net income. While management’s guidance for the upcoming quarter fell slightly short of expectations, the stock’s forward P/E of 31 is close to its five-year average of 30, indicating it could be reasonably valued.

Consider investing in one or more of these Magnificent Seven stocks. Doing so could enhance your portfolio’s performance over the long run, potentially leading to significant short-term gains as well.

Is Amazon a Smart $1,000 Investment Right Now?

Before jumping in, consider this:

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John Mackey, former CEO of Whole Foods Market and an Amazon subsidiary, serves on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also a board member. Randi Zuckerberg, a former Facebook executive and sister of Meta Platforms’ CEO, shares similar ties. Selena Maranjian has positions in 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, as well as certain options on Microsoft. The Motley Fool maintains a strict disclosure policy.

The views expressed here are those of the author and do not necessarily reflect those of Nasdaq, Inc.