Fracturing 'Magnificent Seven' trade puts spotlight on megacap valuations

Published

1 year ago

March 18, 2024

admin

Diverging fortunes for the massive technology and growth names that have propelled the U.S. stock market higher are throwing a spotlight on their pricey valuations.

The so-called “Magnificent Seven” are collectively trading at an average of 33 times their expected earnings for the next 12 months, up from 26 at the end of 2022, according to LSEG Datastream.

That compares with a price-to-earnings ratio of about 21 for the benchmark S&P 500 index, which has risen over 7% this year.

Investors last year were happy to pay up for the megacaps, given the companies’ solid balance sheets and dominant positions atop their industries.

They have been more discriminating this year, punishing the shares of Tesla and Apple when their outlooks turned murky while fueling dizzying gains in Nvidia.

“When you get to those kinds of valuations you have no room for failure, no room for disappointment,” said Mike Mullaney, director of global markets research at Boston Partners.

Concerns about electric vehicle demand have sparked a near 35% drop in the shares of the former market darling Tesla this year, making it the S&P 500’s worst performer.

The stock traded at about 65 times forward earnings at the start of the year, and is down to about 50.

Another Magnificent Seven member, Apple, has ceded its perch as the biggest U.S. company by market value to Microsoft after its shares declined 10% year-to-date, amid pressure in its China business. The stock’s P/E has fallen from 29 to 25.

Meanwhile, chipmaker Nvidia, which trades at about 35 times earnings, has soared about 80% as it established a dominant position in artificial intelligence applications.

AI optimism has also helped drive a nearly 40% gain in Meta Platforms. The Facebook parent trades at 24 times earnings.

By contrast, the Magnificent Seven last year advanced about 50% for Apple to over 230% for Nvidia. Because of the stocks’ heavy weighting in the S&P 500, the group’s performance accounted for over 60% of the index’s appreciation last year.

The S&P 500 rose 24% in 2023.

Markets are awaiting the coming week’s Federal Reserve policy meeting, which concludes on Wednesday.

A strong economy and sticky inflation have lowered investor expectations for how much the central bank will cut rates this year, leading to a rise in Treasury yields that could pressure stocks if it continues.

Investors gauging whether Nvidia can parlay its massive lead in AI computing into long-term dominance will be watching the company’s developer conference, set to kick off on Monday.

Though AI optimism has helped lift a swath of the Magnificent Seven, many investors are grappling with how to weigh the technology’s potential in their valuation models.

“We are in a unique cycle here with AI, so we are struggling to make sure we optimize the opportunity of this massive transitional shift in technology,” said Ken Laudan, portfolio manager for the Buffalo Large Cap Fund, which holds the seven stocks but is underweight them on a combined basis.

While robust earnings have supported the Magnificent Seven’s valuations, the group’s growth trajectory is due to moderate later this year or early next, said Jeffrey Buchbinder, chief equity strategist for LPL Financial.

“At that point, markets may not want to pay double the P/E for this group,” said Buchbinder, pointing the Magnificent Seven’s trailing P/E of 41 versus 23 for the S&P 500.

Many investors remain sanguine regarding the Magnificent Seven’s valuations.

Five of the seven are trading below their five-year median P/E ratios, while the group is trading more cheaply versus the market than a few years ago, JPMorgan strategists said this week.

Nvidia’s P/E has actually fallen from nearly 60 a year ago as analysts increase their profit forecasts for the chipmaker.

“These are companies that are cranking out enormous amounts of cash, very strong balance sheets, visible sources of revenue growth,” said Katie Nixon, chief investment officer for Northern Trust Wealth Management.

But Apple and Tesla’s shares have recently fallen below their 200-day moving averages. Though the rest of the group are above that mark, more of the Magnificent Seven dropping below their trend lines could be a “warning sign” for the market, Citigroup analysts said.

If the Magnificent Seven “start to go down absolutely you could reverse a lot of the recent almost euphoric sentiment,” said Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute.

World

Migrants locked up in notorious El Salvador jail released in Venezuela-US prisoner swap

Published

2 hours ago

July 20, 2025

admin

Migrants locked up in notorious El Salvador jail released in Venezuela-US prisoner swap

On Friday, Paola Paiva waited in a hotel near Caracas airport, nervous but giddy with excitement to be reunited with her brother, finally.

For five months, Arturo Suarez has been detained in a notorious prison in El Salvador.

“I am going to wait for my brother to call me,” she told Sky News, “and after giving him a hug, I want to just listen to him, listen to his voice. Let him talk and tell us his story.”

Suarez was one of the more than 250 Venezuelan migrants who had been living in America but were arrested in immigration raids by the Trump administration and sent to El Salvador, a showpiece act in the president’s promise to deport millions of migrants.

Most of the men had never even been to El Salvador before. Their detention has been controversial because the White House claims the men are all part of the dangerous Tren de Aragua gang but has provided little evidence to support this assertion.

The only evidence Paola had that Suarez was still alive was a picture of him published on a news website showing the inside of the maximum security CECOT jail.

He is one of dozens of men with their hands and feet cuffed, heads shaved and bodies shackled together.

Now he is returning to his home country, one of the bargaining chips in a deal that saw the release of ten Americans and US permanent residents who had been seized by the Venezuelan authorities.

Paola had tried to go to the airport to greet her brother as he disembarked a charter plane bringing the men back from El Salvador but authorities told her to wait at a nearby hotel.

“They told us they are taking them all to a hotel to rest,” she said.

“But I managed to get someone to give my phone number on a piece of paper to my brother, so I am expecting his call tomorrow, as soon as he can access a phone.

“We heard they are going to perform some medical exams on them and check their criminal records,” she added. “I’m not afraid; I’m not worried since my brother has a clean record.

“I am so happy. I knew this day would happen, and that it would be unexpected, that no one was going to notify us. I knew it was going to be a total surprise.”

The Trump administration had paid the El Salvador government, led by President Nayib Bukele, millions of dollars to imprison the men.

Homeland security secretary Kristi Noem visited CECOT last month, posing in front of prisoners for a photo opportunity.

But Cristosal, an international human rights group based in El Salvador, says it has “documented systematic physical beatings, torture, intentional denial of access to food, water, clothing, health care,” inside the prison.

A video which was seemingly filmed aboard the charter flight bringing the Venezuelan migrants back to Caracas shows Arturo briefly talking about his experience inside.

He looks physically well but speaks into the camera and says: “We were four months with no communication, no phone calls, kidnapped, we didn’t know what (the) day was, not even the time.

“We were beat up at breakfast, lunch and dinner,” he continues.

Sky News interviewed Arturo Suarez‘s brother Nelson near his home in the US in April, weeks after Arturo – an aspiring singer – had been arrested by immigration and customs enforcement (ICE) agents while filming a music video inside a house.

Nelson said he believed Arturo’s only crime was “being Venezuelan and having tattoos.” He showed me documents that indicate Arturo has no criminal record in Venezuela, Chile, Colombia or the United States, the four countries he has lived in.

Now Nelson is delighted Arturo is being released – but worries for his future.

“The only thing that casts a shadow in such a moment of joy is that bit of anger when I think that all the governments involved are going to use my brother’s story, and the others on that flight, as political gain,” he said.

“Each of them will tell a different story, making themselves the heroes, when the reality is that many innocent people suffered unfairly and unnecessarily, and many families will remain separated after this incident due to politics, immigration and fear.”

World

Ha Long Bay: At least 34 dead after tourist boat capsizes in Vietnam

Published

2 hours ago

July 20, 2025

admin

Ha Long Bay: At least 34 dead after tourist boat capsizes in Vietnam

At least 34 people have died after a tourist boat capsized in Vietnam, according to state media reports.

The Wonder Sea boat was reportedly carrying 53 people, including five crew members, when it capsized due to strong winds in Ha Long Bay on Saturday.

It happened at roughly 2pm local time (7am GMT). Rescue teams have found 11 survivors and recovered 34 bodies, eight of them children, the state-run Vietnam News Agency said, citing local authorities.

The People’s Army Newspaper, which cited local border guards, said authorities have not yet confirmed details about the tourists, including their nationalities, as the rescue operation continues.

Most of the passengers were tourists, including about 20 children, from the country’s capital city, Hanoi, the newspaper said.

The incident comes shortly after the arrival of Storm Wipha in the South China Sea, bringing strong winds, heavy rain and lightning to the area.

The named storm is the third typhoon to hit the South China Sea this year, and is expected to make landfall along the northern coast of Vietnam early next week.

Disruptions linked to the storm have also had an impact on air travel, according to Noi Bai Airport.

The airport reported that nine incoming flights were diverted to other airports, while three outgoing flights were temporarily grounded due to adverse weather conditions.

The winds brought by Storm Wipha reached up to 63mph (101kmph) and gusts of up to 68mph (126kmph) as it passed south of Taiwan on Saturday, according to the island’s Central News Agency.

Ha Long Bay is around 125mi (200km) north east of Hanoi and attracts tens of thousands of visitors each year.

Of those who visit Ha Long Bay, many choose to take overnight boat tours to further explore the area.

World

Gaza: More than 30 people killed ‘as Israeli troops open fire towards Palestinians waiting for aid’

Published

2 hours ago

July 20, 2025

admin

Gaza: More than 30 people killed 'as Israeli troops open fire towards Palestinians waiting for aid'

More than 30 people have been killed after Israeli troops opened fire towards crowds of Palestinians waiting for aid, according to witnesses and hospital officials.

The deaths occurred near distribution hubs operated by the US-Israeli-backed Gaza Humanitarian Foundation (GHF), which began distributing food packages in Gaza at the end of May, after Israel eased its 11-week blockade of aid into the territory.

At least 32 people were killed on Saturday, according to the Hamas-run Gaza health ministry, while a further 100 people were injured, according to local reports.

Most of the deaths came as Palestinians massed in the Teina area, around 3km (2 miles) away from a GHF aid distribution centre east of the city of Khan Younis.

Mahmoud Mokeimar said he was walking with crowds of people – mostly young men – towards the food hub when troops fired warning shots as the crowd advanced, before opening fire towards the marching people.

“It was a massacre… the occupation opened fire at us indiscriminately,” he said.

Akram Aker said troops fired machine guns mounted on tanks and drones.

“They encircled us and started firing directly at us,” he said.

The Nasser Hospital in Khan Younis said it received 25 bodies, along with dozens of wounded.

Seven other people, including one woman, were killed in the Shakoush area, hundreds of yards north of another GHF hub in Gaza’s southernmost city of Rafah, the hospital said.

The army and GHF did not immediately comment on Saturday’s violence.

The GFH, which has four distribution centres, three of which are in the southern Gaza Strip, says it has distributed millions of meals to hungry Palestinians.

But local health officials and witnesses say hundreds of people have been killed by Israeli army fire as they try to reach the distribution hubs.

The GHF, which employs private armed guards, says there have been no deadly shootings at its sites, though this week, 20 people were killed at one of its locations, most of them in a stampede.

The group accused Hamas agitators of causing a panic, but gave no evidence to back the claim.

The army, which is not at the sites but secures them from a distance, says it only fires warning shots if crowds get too close to its forces.

The 21-month war in Gaza was triggered when Hamas militants stormed into southern Israel on 7 October 2023, killing 1,200 people and taking 250 others hostage.

An Israeli military offensive has killed more than 58,000 Palestinians, according to the Gaza health ministry, while Gaza’s more than two million Palestinians are living through a catastrophic humanitarian crisis.

Israel and Hamas have been holding ceasefire talks in Qatar in recent weeks, but international mediators say there have been no breakthroughs.

US President Donald Trump said another 10 hostages will be released from Gaza shortly, without providing details.