The Magnificent 7 continues to dominate stock market performance.
Have a look at the relative stock market performance of this group vs the S&P 500 (the largest 500 companies in the US) for 2023.
Chart: The Bloomberg Magnificent Seven – 2023 Performance vs the MSCI World Index |

Source: Ninety One
The Magnificent 7 was originally a Western film that came out in 1960

What you may not know, is that this was a copy of a film that came out a few years before it.
In 1954, a movie called the Seven Samurai was released. The Magnificent 7 was clearly a copy. They just wear cowboy hats and carry guns instead of swords and so on.

So, while to many people the Magnificent 7 was an original film never seen before, it was in fact a copy of an earlier film. If you had seen the earlier film, you would have realised this, and this may have spoilt the Magnificent 7 as the plot line is basically a repeat.
Today we have the Magnificent 7 stocks. Have we seen this movie before?
Well, on 7 April 2000, Goldman Sachs came up with their Super Seven –
Goldman Sachs ‘Super Seven’ – 7 April 2000

“During this period of extreme volatility, we recommend technology names [in whose fundamentals] we continue to have high conviction,” Goldman said in its report in April 2000.
Those were the Magnificent 7 of 2000. And how did they do over the next 5 years? The next 10 years?
The table below illustrates – down 52.8% after 5 years, and down 36.6% after 10 years. Shareholders of these companies really suffered.

There’s a great saying that goes something along the lines that ‘History doesn’t repeat itself, but it rhymes’.
And we may therefore find that if we hold a full blown portfolio of these Magnificent 7 stocks, it’s quite possible that we find ourselves watching the sequel to it with the same outcome.
I’ve written before that some of these tech stocks seem unbeatable. I’m not saying you shouldn’t hold any.
It’s nice to own things that go up a lot, but you must be a little careful about what you get on the way up and how it affects your decisions.
To give an illustration – the table below shows the returns of a stock that you could have bought in 2018 for $127 a share. By September 2021, it was $273.

It more than doubled and has recently been trading at $484. It generated a 196% return during the five and a bit years.
Pretty good, isn’t it. Do you want to own it? I want to own it. I’m in if you are.
The problem is it did this to get there –
Chart: Meta (Facebook) stock performance

While it was up 196% for the period, it had 3 really big drawdowns. One of them was 76% (!).
How would you feel if you owned this stock, even though we now know, with the benefit of 20/20 hindsight, that if it was a great returner.
How would you feel when after owning a stock for 4 years, you were down 50%?
Would you have stuck around?
I know a very respected global equity portfolio manager with a R10 billion fund who sold out at that point.
I can tell you how I felt because I owned the share. It’s Meta (Facebook). And that’s the nature of the returns of the Magnificent 7.
If you are going to invest, you really want a diversified portfolio. It should have some things in it that are quite stayed, that don’t ever produce returns like this. The Unilevers, the Procters & Gambles, the Pepsico Co’s of this world.
Even if we could identify the next Magnificent 7, we don’t necessarily want to own them all. There’s just too much risk. Because they do things like drop 76% over short periods of time, and this causes us to get worried. And when we get worried, we can make bad decisions based on those emotions.
Everyone should own at least one stock like that. And if you believe in it, then you should buy more. The most important thing though, is that it’s 1 stock. You don’t want 27 of them. Because if they all move in unison like that, then I’m afraid it’s game over. We are not all going to have the fortitude to live through that even if we should have in the end.