Magnificent Seven Stocks Face Recession Concerns: Investors Divided on Best Performer

EXCLUSIVE: Which Magnificent 7 Stock Could Best Weather A Recession? Benzinga Readers Split On Pick, With A Tie For The Win - Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN)

A look at which Magnificent 7 stock Benzinga readers think would do best if there is a recession. A large drop in the market on Monday sparked fears of a recession. While the stock market has recovered in the days since, investors are factoring concerns of a recession and high valuations for stocks including the Magnificent 7 members. What Happened: The SPDR S&P 500 ETF Trust SPY, which follows the S&P 500 Index, and the Invesco QQQ Trust QQQ, which tracks the Nasdaq 100 had large drops of 3% due to economic uncertainties and global fears. With many stocks down on Monday, the Magnificent 7 stocks were also hit and some investors chose to buy the dip on these stocks that have typically outperformed the broad market. Benzinga asked readers their opinion on the outlook for the Magnificent 7 stocks. "Which of the following Magnificent 7 stocks do you believe will be best able to weather a recession?" Benzinga asked. Here are the results: Amazon.com Inc AMZN: 27% NVIDIA Corp NVDA: 27% Microsoft Corp MSFT: 22% Apple Inc AAPL: 8% Alphabet Inc GOOGGOOGL: 6% Tesla Inc TSLA: 6% Meta Platforms META: 4% The poll found readers think Amazon and Nvidia are best positioned to weather a potential recession. Amazon is a leader in e-commerce and has its AWS cloud business that has increased revenue and earnings. Nvidia has been a top-performing stock in recent years and is viewed as a leader in artificial intelligence by many. Ranking close behind the winners was Microsoft, a company that operates in cloud, search, video games, business software and more segments. Read Also: Tech Stocks Rally After 5-Day Slump As Recession Panic Eases: Nasdaq 100 Movers To Watch Thursday Why It's Important: While fears of a recession have shrunk in the days since Monday, investors should be aware that August and September are traditionally weak months for the stock market. Investors could be looking for hedges against market underperformance or for the coming years of growth from trends such as artificial intelligence. Here's a look at the year-to-date, one-year and five-year performances of the Magnificent 7 stocks as of Aug. 8: Apple: +11.0% YTD, +19.5% 1-Year, +320.2% 5-Year Microsoft: +7.7% YTD, +22.7% 1-Year, +199.3% 5-Year Alphabet: +16.9% YTD, +24.1% 1-Year, +177.7% 5-Year Amazon: +9.4% YTD, +16.9% 1-Year, +85.4% 5-Year Nvidia: +112.4% YTD, +131.6% 1-Year, +2,557.9% 5-Year Meta: +42.9% YTD, +59.7% 1-Year, +165.9% 5-Year Tesla: -19.6% YTD, -20.5% 1-Year, +1,184.4% 5-Year For comparison, the SPDR S&P 500 ETF Trust is up 11.5% year-to-date, up 15.1% over the last year and up 80.5% over the past five years. Only three of the Magnificent 7 stocks are ahead of the SPY year-to-date. Looking longer-term, six of the seven Magnificent 7 stocks have outperformed the SPY over the past year and all seven have outperformed the SPY over the past five years. Benzinga recently asked readers if they thought markets would hit new highs in 2024. The poll found that 72% of readers don't think the market has peaked for 2024, suggesting more gains coming in the final four months of the year. For investors looking for exposure to the Magnificent 7 stocks without having to choose one or two winners, there is the Roundhill Magnificent Seven ETF MAGS, which holds all seven stocks. The study was conducted by Benzinga on Aug. 6 and Aug. 7, 2024, and included the responses of a diverse population of adults 18 or older. Opting into the survey was completely voluntary, with no incentives offered to potential respondents. The study reflects results from 113 adults. Read Next: Fed Rate Cuts Could Avert Recession, Say 75% In Benzinga Poll: Majority See Market Dip As Temporary Photo: Shutterstock Market News and Data brought to you by Benzinga APIs

Can the 'Magnificent Seven' Stocks Rebound From Their Longest Slump in Years?

Analysts have mostly characterized the recent selloff as a natural pullback that, to some, has improved the attractiveness of Mag Seven valuations. U.S. stocks on Friday were, after a volatile week, on track to post their fourth consecutive weekly decline as the long "Magnificent Seven" trade that has fueled market gains for more than a year continued to falter. The Magnificent Seven are in the midst of their deepest pullback since the group was named in 2023. The Roundhill Magnificent Seven ETF (MAGS) was, as of Thursday's close, down 15.5% from its all-time high on July 10. As of Friday afternoon, one Mag Seven index was on track to notch its fifth consecutive weekly decline, which would be the group's longest losing streak since December 2022. Nvidia (NVDA), the poster child of the group, has fallen more than 20% from its recent peak. The stock on Friday was on track to close lower for the week after failing to stage the kind of comeback it did last Wednesday when it jumped 13% the day after a big selloff. The Mag Seven were hit with a triple whammy in recent weeks. First, a soft inflation report on July 11 sparked speculation the Federal Reserve would cut interest rates as early as September, fueling a rotation out of cash-rich mega caps into the small caps that stand to benefit most from rate cuts. Second, Wall Street homed in on the Mag Seven's surging artificial intelligence (AI) spending in recent earnings reports, which often overshadowed otherwise solid results. Shares of Alphabet (GOOGL) and cloud competitors Microsoft (MSFT) and Amazon (AMZN) tumbled after the former said it would continue to ramp up AI infrastructure spending in 2025. Finally, the unwinding of the yen carry trade, a popular investment strategy in recent years, sparked a broad selloff that sank Mag Seven stocks even further into correction territory on Monday. While substantial economic and political uncertainty continues to loom over financial markets, most analysts have characterized the stock market's recent pullback as a natural and healthy one. "On average, stocks experience a pullback of over 5% over three times per year and a correction of 10% or more around once per year -- even in positive years," wrote George Smith, portfolio strategist at LPL Financial, in a recent note. He added that 94% of the years since 1928 have seen a pullback of 5% or more, and 64% have had a 10% correction. "We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient, stay invested, and most importantly, to not panic," said Smith. As for the Magnificent 7 in particular, some see the recent dip as a buying opportunity. Morgan Stanley analysts on Thursday argued that the group's current valuation is, assuming earnings growth expectations hold up, historically attractive. "The Mag 7 currently trades at a material discount to the trailing 5 year valuation average, as forward EPS growth is expected to accelerate vs. trailing 5 year growth (25% forward CAGR vs. 21% trailing CAGR), implying a median Mag 7 forward PEG ratio of 0.8x vs. a trailing PEG ratio of 1.3x," the analysts wrote. Though they concede that a soft landing, despite being their base case, is not inevitable, and a recession would dramatically alter the outlook for tech earnings. Nonetheless, the group's cost discipline has contributed to resilient earnings, putting the group on relatively solid ground. Plus, based on first-quarter 13-F filings, by which fund managers disclose their holdings, most of the Mag Seven appear to be under-owned relative to their market weight. "We believe this added context is important given that ... there is a statistically significant relationship between low active ownership relative to the S&P 500 and future stock performance," the analysts wrote.