Click here for the PDF: The Weekly Beacon – July 28 2023
We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.
Feel free to send in your pictures of lighthouses to be featured in our weekly commentary.
This weeks issue: Copper production, Copper stocks, Copper demand, Copper reserves, Southern copper, Freeport-McMoran, Magnificent 7, Technology stocks, Market consolidation, P/E ratios, S&P 500, EPS growth, British billionaire, Joe Lewis, Insider trading, Regional banks, KRE ETF, JP Morgan stock, PacWest and Banc of California merger, Regional bank weakness, FED, powell, FED Funds Rate, Wind power, Offshore wind, Oil producers go green.
The Magnificent Seven
We have talked about the market’s consolidation throughout this year. Mega-cap stocks have led the charge and have accounted for most of the returns across major indices. These mega-cap stocks that have surged are all technology names and are known in finance as the “Magnificent Seven”.
The Magnificent Seven include:
These companies have three major things in common.
- They are all considered technology companies (yes, we include electric-vehicle Tesla in this as many justify the company’s valuation by saying it’s a tech company, not an auto producer).
- They are all betting on AI. These companies are all developing and integrating artificial intelligence into their platforms or services. These companies made sure to mention the term AI in recent earnings calls as much as possible.
- They trade at ridiculous multiples.
We will not jump into the first two points, but we will look at the third. Just how expensive do these seven stocks trade at, how expensive are they relative to the rest of the S&P 500, and how expensive are they compared to historical averages? When we say expensive, we are talking valuation – specifically the multiples that these stocks, and indices trade at. Today we will look at price-to-earnings ratios to get our point across.
