The Magnificent 7 stocks have witnessed a historical year, with members like Nvidia (NVDA), Meta Platforms (META), and Google (GOOGL) all up by around 30%. At the same time, these high-octane stocks could still have fuel left in the tank, according to a study conducted by Bank of America.
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Strategists led by Michael Hartnett analyzed ten stock bubbles since 1900 and concluded that the average trough-to-peak return was 244%. The Magnificent 7 have risen by 223% since March 2022, suggesting that the group has “more to go.”
Magnificent 7 Crowded, But Not Yet Extreme
The team also found that previous stock bubbles concluded with trailing price-to-earnings (P/E) ratios around 58x with prices 29% above the 200-day moving average. The Magnificent 7 currently have an average trailing P/E of 39x while trading an average of 20% above their 200-day moving averages.
The findings come despite the Magnificent 7 being the most crowded trade in Bank of America’s fund manager survey, showing that 42% of respondents were long the group. Hartnett suggested holding “distressed value” stocks alongside big tech, highlighting energy stocks and companies in the United Kingdom and Brazil.
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