We will touch on magnificent seven but before that we will discuss other thing.
A sector that assisted in propelling the S&P 500 to its greatest first half since 2019 has many people wondering whether that is still possible. So Magnificent seven will also be discuused here but on the plus side, history shows that one successful half can eventually lead to another, but some people worry that excessive investor euphoria could ruin things.
Looking ahead, a further clear concern is how to identify outperformers similar to the “Magnificent Seven” tech names that dominated the first half. Amazon Microsoft Symbols Tesla and Nvidia Meta.
Some suggestions on that front, was surprise! Tesla is one of them. It comes from a group at Goldman Sachs led by top U.S. equity strategist David Kostin.
Goldman improved its “Rule of 10” stock screen, which identifies businesses with realized and projected sales growth of greater than 10% for the years 2021 to 2025, in order to find the new names. They observe that each of the names has shown high sales growth, with the exception of 2022, and that this trend has been consistent since 2010.
The largest tech stocks in the U.S. equities market demonstrate that investors can profit by picking companies that can achieve sustained sales growth of 10%+ even in their early phases. As they rose up the index ranks, today’s largest stocks were frequently characterized by rapid and steady revenue growth, according to Kostin and the team.
There are about 20 names that fit this description, and one of the major tech leaders is Tesla. According to Goldman, Salesforce has consistently been chosen. Enphase Energy is among the top 10 names on this list. SolarEdge and Tesla Networks Palo Alto ServiceNow Software Paycom Fortinet Insult and DexCom.
In addition, Goldman provided a stock screener based on the rise of net income. For the years 2021 to 2025, those must have net income growth of greater than 10% annually.
According to them, 18 names currently meet this requirement and are trading at discounts to the S&P based on price/earnings and price/earnings growth ratios. Schlumberger, Match Group Insulet, Bookings Holdings, ServiceNow, Chipotle Paycom, and Halliburton round out the top 10.
Additionally, eight businesses—Paycom, Fortinet, Insulet, Salesforce, Intuit, Cadence Design Systems, and Aptiv—appear on both lists.
As a side note, Kostin and the team address the entire narrow market issue, claiming that returns have often been concentrated on a small number of outperformers in any given year. Look at the graph below:
“Excluding the top 10 contributors in each year, the S&P 500 would have delivered an 8% average annual return since 1990 (vs. 12% for the full index),” they claimed. Approximately 12 percentage points of the S&P 500’s 15% year-to-date return are attributable to the top 10 contributors.
Disclaimer : VIews are not mine , trade as per your financial advisor , article is only for knowledge share.
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