Identifying the Rising Stars
In the wake of the mega-cap tech slowdown, the investment community is eagerly eyeing the horizon for the next batch of stellar performers. Enter Ritholtz Wealth Management‘s astute Josh Brown, armed with a keen eye and a trusty stock screener. Brown has unveiled the “Mag 7 Bench,” a roster of companies poised to potentially ascend to greatness.
Key Metrics: Brown dissected the selection process based on market cap, relative strength, price-to-earnings ratios, and revenue growth. All seven companies identified boast market capitalizations under $350 billion, 14-day relative strength between 45 and 65, forward price-to-earnings ratios not exceeding 85, and robust five-year annualized growth rates above 25%.
Delving into the importance of sustained growth rates, Brown shared, “Look at the five-year annualized growth, this was the thing that knocked everybody else out by the way. When we asked for 25% plus five-year annualized growth, we ended up with nine stocks.”
Let’s take a closer look at the dynamic lineup that Brown and his team meticulously curated:
- Advanced Micro Devices Inc AMD
- Uber Technologies Inc UBER
- CrowdStrike Holdings Inc CRWD
- Palantir Technologies Inc PLTR
Brown cautioned that while the list is not flawless, it serves as a thought-provoking exercise for investors. “Here’s what I would do with this list,” he suggested. “I would look at the business that these companies are in and I would just ask like, could this be something that would justify a trillion-dollar market cap someday in the future?”
Drawing parallels with Uber, Brown mused about the transformative potential in various industries that could potentially propel these companies to trillion-dollar valuations. “If you ran the same stock screener five years ago,” Brown reflected, “some of the names in the current Magnificent Seven would have been overlooked. Even if you ran the same screener, but lowered the five-year annualized growth rate requirement to 20%, both Apple and Microsoft would have been left out.”
As investors ponder the possibilities, the Mag 7 Bench provides a compelling glimpse into the promising future of these select companies.