Discover the three under-the-radar stocks that have the potential to deliver long-term gains for shareholders.
Just a year ago, replacing Tesla (NASDAQ:TSLA) among the elite Magnificent 7 stocks seemed preposterous. However, with a 50% drop in value since November, the idea of finding a worthy successor to Elon Musk’s brainchild has gained traction.
The situation has become so dire that Quartz even floated the suggestion of Abercrombie & Fitch (NYSE:ANF) as a replacement for Tesla in the Magnificent 7.
“Tesla is in a bunch of trouble: Its latest-and-greatest product is a rusty truck that has trouble going uphill in the snow. Its losing EV market share in the U.S. CEO Elon Musk reportedly has a drug problem so bad his board member friends want him to go to rehab,” wrote Quartz contributor Melvin Backman.
While I’ve been advocating for Abercrombie for some time now, it’s important to recognize that comparing a $6 billion market cap company to an EV manufacturer that generated $4.4 billion in free cash flow in 2023 is like comparing apples to oranges.
To be in the Magnificent 7, a company should have a market cap of at least $500 billion. This narrows the field down to just six companies, with only two of them being tech stocks, setting the stage for potential Tesla replacements.
Here are three prime candidates to step into Tesla’s exclusive group.
Berkshire Hathaway (BRK-A, BRK-B)
Source: Jonathan Weiss / Shutterstock.com
Berkshire Hathaway (NYSE:BRK-A),(NYSE:BRK-B) boasts a market cap of $872.5 billion, a staggering $252 billion more than Tesla.
Even though Warren Buffett reduced his stake in Apple (NASDAQ:AAPL) in the final quarter of 2023, it still accounts for about 45% of the holding company’s portfolio. This honorary tech business may not be growing at the same speed as others, but the wealth it has generated for countless individuals holds paramount significance.
In fact, an article in Bloomberg published in May 2019 highlighted how Berkshire’s growth had facilitated the creation of at least seven billionaires, including the late Charlie Munger, Buffett’s close confidant and Vice Chairman.
Personally, I can attest to the life-changing impact that investing in Berkshire shares has had on several families. This enduring support is, in simple terms, magnificent.
Eli Lilly (LLY)
Source: Jonathan Weiss / Shutterstock.com
Eli Lilly (NYSE:LLY) boasts a market cap of $720.2 billion, $99 billion more than Tesla.
Technological magnificence isn’t the sole criterion for a Magnificent 7 contender. As crucial contributors to society, healthcare companies like Eli Lilly play a vital role in saving lives.
Reflecting on the tragic tale of Teddy Roosevelt’s wife and mother passing away on Valentine’s Day in 1884, one appreciates the strides we’ve made in ensuring sanitary living conditions. Such progress, as exemplified by companies like Eli Lilly, is integral to preserving countless lives.
Just recently, Jefferies analyst Akash Tewari raised the price target on LLY stock to $853, emphasizing the significant potential of its orfoscerinib drug in clinical trials, which could achieve peak annual sales of $14 billion.
JPMorgan Chase (JPM)
The Enduring Legacy of JPMorgan Chase: Big Bank, Bigger Potential
When it comes to the heavyweight champions of finance, few can rival the sheer heft and heritage of the colossal JPMorgan Chase (NYSE:JPM). With a market capitalization exceeding half a trillion dollars, this banking behemoth stands as a modern Colossus of Rhodes, its might and influence resonating across the financial landscape. While many investors have fixated their gaze on the stratospheric rise of Tesla, few may realize that JPMorgan Chase boasts a market cap of $519.7 billion, a mere $101.2 billion shy of the electric vehicle pioneer.
A Storied Journey of Steady Growth
Since its inception, JPMorgan Chase has unfurled a steadfast, if gradual, rise to prominence, exemplifying the quintessential tortoise in the fabled race against the hare. On Feb. 15, the stock ascended to an all-time high of $180.04, a testament to its enduring resilience. While the pace of its ascension may not quicken the pulse of investors in the same vein as more volatile equities, its shares have nonetheless appreciated by a commendable 1,516% since 1984, a feat that commands respect in its own right. Moreover, the stock sweetens the pot with a 2.5% dividend yield, offering investors a steady and reassuring source of income.
Cautious Optimism and Pitfalls of High Interest Rates
Yet, in the perpetual ballet of market forces, JPMorgan Chase has not been immune to the vicissitudes of economic headwinds. The specter of high interest rates has cast a pall over the behemoth, with interest expense devouring a troubling 48% of its interest income in 2023. A stark contrast to the more auspicious 28% ratio witnessed in 2022, this unfavorable dynamic underscores the bank’s vulnerability in the face of restrictive monetary policy. However, as interest rates retreat from their towering heights, a sunnier horizon may emerge for JPMorgan Chase, with the potential for increased profits peeking tantalizingly over the horizon.
Reassurance and Acclaim from Analysts
Guiding investors through the labyrinthine convolutions of the stock market, analysts have bestowed their favor upon JPMorgan Chase, with 19 out of 26 analysts rating it as a “Buy” – a resounding 73% endorsement. The consensus target price of $194, a comfortable 8% uplift from its current share price, evokes a sense of reassurance and buoyancy in the stock’s future trajectory. Such affections from the analyst community serve as a steadfast bulwark, underpinning investors’ confidence with a sense of emboldened optimism.
As the rivulets of time continue to etch their indelible mark upon the annals of finance, JPMorgan Chase stands resolute, weathering the tempestuous tides of the market with a tenacity that befits its status as a paragon of stability and fortitude. Nay, while the currents of change may buffet its hulking frame, the bank remains an unwavering colossus, embodying the enduring spirit of the financial sector with a sense of grandeur and aplomb.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
