This year, the market has heavily focused on the Magnificent Seven (M7)- including Apple, Microsoft, Nvidia, Tesla, Amazon, Google, and Meta. The seven stocks account for over 25% of the market cap of the S&P 500. Their aggregated year-to-date performance is about 4x of the market.
This week’s scan looks for similar traits of the M7 stocks, excluding size, within the remaining S&P 500 stocks. For instance, the weighted average P/E of the M7 is 43, and the price to sales is 10, so similar high valuations are a requirement.
The table below shares the various statistics we screened for.
Screening Criteria
- P/E more than M7 >43
- P/S more than M7 >10
- P/B more than M7 >22
- YTD Performance more than M7 > 82%
- Average analyst rating more than M7 < 1.57 (scaled 1-5 – strongest to weakest)
The scan proved how unique the M7 traits are. It only yielded three securities. And, to get to three, we had to relax some of the qualifications. LLY had a slightly worse analyst rating than the weighted average of the M7. Additionally, we accepted lower-than-average year-to-date performance for CDNS and LLY.
Company Summaries (all descriptions courtesy Zacks)
Cadence Design Systems (CDNS)
Eli Lilly & Co (LLY)
Palo Alto Networks (PANW)
Five for Friday
Five for Friday uses stock screens to produce five stocks that we expect will outperform if a particular investment theme plays out in the future. Investment themes may be relevant to the current or expected market, industry and/or economic trends. Investment themes may not always represent our current forecast.
Disclosure
This report is not a recommendation to buy or sell the named securities. We intend to elicit ideas about stocks meeting specific criteria and investment themes. Please read our disclosures carefully and do your own research before investing.
Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research.
Follow Michael on Twitter or go to 720global.com for more research and analysis.
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