7 Standards and 496 Poors

Should seven companies hold up the market? [TradeSmith Daily]( 7 Standards and 496 Poors By Michael Salvatore, Editor, TradeSmith Daily The S&P 500 looks a lot like the S&P 7 these days. Just a handful of stocks — seven of which are now called “Magnificent” by the mainstream media — are responsible for the majority of the gains this year. The whole market dances to their tune. But watch out: When they tumble, they can drag your retirement portfolio down with a ferocity like nothing else. Just look what happens when you compare the benchmark S&P 500 to the equal-weighted S&P. Not only is the entire equal-weighted stock market down over 8% this year — it never confirmed a new bull market. Both times the index has rallied about 22% off the lows, it got smacked down again. Should just seven “magnificent” companies, which collectively make up over 28% of the S&P 500, be enough to guide us to a new bull market? Should the generals be the only ones marching into war? To be fair, some of these stocks are magnificent for good reason. They represent outstanding businesses with big cash moats and are leaders in their fields. But that doesn’t mean all of them are. And should any of them crack, it could spell disaster for your portfolio. Earnings season is giving us clues about which stocks are the weakest links in the chain. So today, I’ll round up the Magnificent Seven’s earnings reports so far and probe them for weak spots. But first, we must understand just how big an impact these seven stocks have for every retirement portfolio out there. RECOMMENDED LINK [Urgent Briefing: Get on the Right Side of the Massive, $15.7 Trillion Wealth Transfer]( A “second wave” of A.I. investments is about to pop – with 100X the potential of any gains so far. And if you take the right steps today, you could turn every $100 into $1,000... every $10,000 into $100,000... and beyond. [Details HERE...]( 7 Standards and 496 Poors The Magnificent Seven are, in order of S&P 500 weighting: - Microsoft (MSFT) - Apple (AAPL) - Amazon (AMZN) - Nvidia (NVDA) - Alphabet (GOOG and GOOGL) - Meta Platforms (META) - Tesla (TSLA) These stocks collectively make up 28% of the S&P. And a majority of the S&P 500 stocks, 308 of them to be precise, each make up just 0.10% of the index or less. That’s an issue. But at least in the short term, it’s probably for the best. 268 of the S&P 500 stocks are down year-to-date. That’s what’s dragging down the returns of the equal-weighted index. So, this is the situation your, my, and everyone else’s retirement portfolio is in. We’re overwhelmingly concentrated toward seven major tech firms. That means it’s critical to understand where these companies sit in terms of overall health and their most recent performance during quarterly earnings season. Let’s take a close look at each one’s recent report, with the help of TradeSmith’s proprietary Business Quality Score (BQS)… (Disclosure: I directly own shares of MSFT and AAPL) - Microsoft (MSFT) | 7.23% Weighting Microsoft earns its “Magnificent” title. It stands strong with a Business Quality Score of 89. And in its recent earnings report, the company beat on earnings per share (EPS) by 13% and on revenue by 3.6%. Its revenue grew 12.76% year-over-year. Microsoft is at the forefront of A.I. technology right now, with its high-profile investment in OpenAI this year. This is encouraging, but also presents some risk if the bullish A.I. narrative dissipates. - Apple (AAPL) | 7.19% Weighting AAPL currently holds the best BQS score I’ve seen since I began using the tool, an almost-perfect 99. The recent earnings report was a mixed bag, however. AAPL beat on both revenue and EPS, but lower demand in China is eating into its revenues, which were down over 1% from a year ago. The company also posted its fourth quarter of sales declines, the first time that’s happened since the bursting of the dot-com bubble. AAPL is a remarkably robust company, but we should be wary of any cracks that could knock it down a peg. Especially with its large weighting in the S&P 500. - Amazon (AMZN) | 3.45% Weighting Amazon sits in the top half of BQS scores in this list, with a 91. And in its most recent earnings report, the company beat on both EPS and revenue, with a strong EPS beat of over 60%. Its revenue also grew 12.5% year-over-year. AMZN is in a slightly more precarious position than the others in this list, I’d wager, due to its role as the largest consumer discretionary stock. If the Fed’s rate hikes are finally beginning to slow the economy, consumers will begin to think twice about luxury Amazon purchases, shopping at Whole Foods, and potentially even keeping their $139-per-year Prime memberships. It also makes up the third-largest chunk of the S&P 500, at 3.45%. AMZN is one of the stocks to watch for signs of cracks in the system, especially if the economy really begins to slow down. - Nvidia (NVDA) | 2.91% Weighting NVDA, too, sits in the upper crust of the BQS with a score of 95. Nvidia hasn’t yet reported earnings, but is set to later this month on Nov. 21. Its April earnings report was an absolute blowout, with $13.5 billion in revenue against $11 billion expected and an EPS beat of 30%. That report was enough to send the stock 5% higher before the entire market began to collapse in August. Its previous report had an even bigger impact, sending the stock 31% higher in a move that marked the beginning of the 2023 A.I. mania. All these big earnings moves set high investor expectations for NVDA stock, so we should tread carefully around its earnings report later this month. RECOMMENDED LINK [I QUIT traditional investing (Watch this crazy 1-minute trading demo)]( I’m not buying ANY stocks, cryptos, or bonds for the foreseeable future... and instead, I’m just repeating [one easy-to-follow trade](. A trade that could pay hundreds, even thousands, of dollars almost every time you execute it... (89.47% of the time to be exact). [And in this short video]( I’m going to demonstrate the entire process step-by-step so you can start using it too. [Go here to see how ONE trading technique could make you $1,000 per month](. - Alphabet (GOOG and GOOGL) | Class A and Class C shares make up 3.93% Weighting Next up is Alphabet, with a strong BQS of 87. Alphabet’s recent earnings report invited a quick selloff as investors were unimpressed with the growth of its cloud business, which had previously been growing faster than its biggest competition from Microsoft and Amazon. Despite this, the stock still beat on EPS and Revenue at 7% and 1.2%, respectively. The company grew revenue 11% over the previous quarter, an impressive figure for a stock of this size. - Meta Platforms (META) | 1.92% Weighting META has had a stunning recovery in 2023, after its full-throated pivot to building the “Metaverse” ran headlong into the bear market of 2022, when the financial world quickly stopped caring about such pie-in-the-sky trends. Its business has clearly held up despite the pivot, too, with a BQS of 85. Its recent earnings report was also strong. It beat EPS expectations by 18.54%, and had a slight beat on revenue, with $34.15 billion reported versus $33.45 billion expected. META stock is up more than 150% so far in 2023, and the trend appears tremendously healthy. Of the Magnificent Seven stocks, this is one I’m least concerned about. - Tesla (TSLA) | 1.56% Weighting TSLA is the sore thumb sticking out in the Magnificent 7. Its BQS is a solid, but relatively poor 75 out of 100. It’s also had the roughest earnings season out of any other Magnificent Seven stocks. It reported EPS of $0.66 against expectations of $0.73, a miss of nearly 10%. And it missed on revenue by 3.29%, with reported revenue of $23.35 billion against $24.14 billion expected. Year-to-date, the stock is up over 100%, but it’s now 25% down from its highs. TSLA may represent the smallest share of the S&P 500 out of the Magnificent Seven, but it represents the biggest risk of the group. If the generals are going to be the only ones heading into battle, we should be somewhat comfortable with the fact that they’re all in solid shape. And if you’re going to keep a close eye on these stocks or any other stocks you own, I highly recommend you use [Ratings by TradeSmith](. The Business Quality Score is just one of the tools that encompasses the [Ratings by TradeSmith]( experience. If you want to track the direction and sentiment of every stock in your portfolio, you need Ratings by TradeSmith on your side. [Go right here to learn all the details about it.]( To your health and wealth, Michael Salvatore Editor, TradeSmith Daily Get Instant Access Click to read these free reports and automatically sign up for research throughout the week. [25 Doomed Blue Chip Stocks]( [3 Stocks That Could Triple This Year]( [Download now on the Apple Store]( [Get It On Google Play]( [Customer Support: 866.385.2076](tel:+866-385-2076) | support@tradesmith.com [Request Customer Service](mailto:support@tradesmith.com) ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers’ exemption of the Investment Advisers Act of 1940. 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