The powerhouse mega-cap companies, known as the Magnificent Seven ("Mag 7"), have shown remarkable outperformance in the market, sparking discussions about a potential bubble. Delving into historical performance, we focus on the "Largest 7" instead of solely the "Mag 7" for a detailed analysis.
NDR’s Custom Research Solutions (CRS) group answered the question, “How different are the Largest 7 stocks from the 2000 bubble compared to today?”
The characteristics of the largest stocks can change appreciably over time. In this case, the Largest stocks today have cheaper valuations compared to the Largest 7 in 2000. Additionally, in both absolute terms and relative to the rest of the index, today's Largest 7 stocks generate more operating cash flows per dollar of assets and have been growing sales much faster than the Largest 7 stocks back in 2000. This is shown by the grey bars in each of the three sections of the chart above.
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