The Bull Market Thrives: The Rise of Meta Platforms and the Magnificent Seven

For more than two years, the bulls have dominated Wall Street. Last year, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite posted impressive returns of 13%, 23%, and 29%, respectively, with all three indices reaching new all-time highs.

The drivers of this bull market include a variety of factors, but a notable theme has been the remarkable performance of the “Magnificent Seven.”

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The Dominance of the Magnificent Seven

The Magnificent Seven refers to seven of the largest and most influential companies on Wall Street. These companies, ranked by market cap, include:

These corporations boast a history of outperforming the widely followed S&P 500 index. While the S&P 500 has nearly tripled over the last ten years, the worst-performing member of the Magnificent Seven, Alphabet’s Class A shares (GOOGL), has increased by 639%. In contrast, Nvidia has skyrocketed over 27,400%!

NVDA data by YCharts.

The strength of the Magnificent Seven lies in their sustainable competitive advantages:

The consistent outperformance of the Magnificent Seven has caught the attention of Wall Street’s top money managers, making many of these stocks favorites among billionaire investors.

Meta Platforms: The Crown Jewel

According to mandatory quarterly Form 13F filings with the Securities and Exchange Commission, we can see which stocks top-performing fund managers are buying, selling, and holding. For billionaires Chase Coleman of Tiger Global Management, Philippe Laffont at Coatue Management, and Stephen Mandel at Lone Pine Capital, their largest holding is Meta Platforms (with total shares owned and percentage of portfolio as of Sept. 30):

• Tiger Global Management: 7,465,139 shares (17.41% of portfolio by market value)
• Coatue Management: 3,694,259 shares (7.86% of portfolio by market value)
• Lone Pine Capital: 1,891,337 shares (8.08% of portfolio by market value)

Notably, Meta was also the second-largest holding for billionaire Terry Smith of Fundsmith, often referred to as “Britain’s Warren Buffett.” Given Meta’s strong performance compared to Microsoft since Sept. 30, it would likely be Fundsmith’s largest holding today, assuming no changes in share ownership.

What has driven these successful investors to prioritize Meta Platforms?

One major factor is Meta’s unparalleled position in the social media landscape. The company’s suite of apps—Facebook, Instagram, WhatsApp, Facebook Messenger, and Threads—each boast an impressive 3.29 billion daily active users combined. Advertisers recognize that no other platform can deliver such reach, allowing Meta to command premium prices for advertising.

Moreover, Meta has refined a strategy for launching new assets and monetizing them strategically. For instance, Threads reached 100 million monthly active users shortly after its launch in July 2023. Yet, CEO Mark Zuckerberg’s team chose to delay advertising monetization. Now that Threads has surpassed 300 million MAUs, Meta is well-positioned to start generating significant advertising revenue.

The billionaires are also likely excited about Meta’s ambitious growth avenues, such as AI and the metaverse. In January 2024, Meta announced plans to acquire 350,000 Hopper GPUs from Nvidia for around $10.5 billion, aimed at bolstering its AI capabilities. Additionally, Meta has been providing generative AI solutions to help advertisers create tailored messages.

In a market characterized by high valuations, having financial resources is crucial. As of the end of September, Meta held $70.9 billion in cash and marketable securities, averaging over $21 billion in net cash generated from operations each quarter. This solid cash position allows Meta to take calculated risks and still have enough to provide dividends and buy back stocks.

The last factor that might explain why Coleman, Laffont, and Mandel favor Meta over other stocks is its valuation. Despite a forward price-to-earnings (P/E) ratio of 25, the highest in years, Meta’s price-to-earnings-growth (PEG) ratio stands at 1.08, nearly equal to its average PEG ratio of 1.09 over the past five years.

In simpler terms, considering Meta’s fast-paced earnings growth, its current P/E ratio remains appealing. While stock prices can fluctuate, the outlook for Meta looks promising.

Is Now the Right Time to Invest $1,000 in Meta Platforms?

Before making any investment in Meta Platforms, consider this:

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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