Over the past few years, a subset of the stock market has been in the limelight – technology and innovative stocks, often referred to as the Magnificent 7. This group comprises Facebook, Apple, Google, Amazon, Microsoft, Netflix, and Tesla. These tech forces have been the driving force of the booming stock market in the previous decade. However, with the stock market being in turmoil due to COVID-19 implications and predictions of a looming recession, investors may be wondering whether it’s time to sell the ‘Magnificent 7.’
An in-depth look into these stocks is important to dissect the current situation. Considering the giants in this group, it’s apparent they dominate different sectors of the technology-driven economy.
Facebook, along with Google, owns the realm of online advertisements. However, with businesses cutting down on expenditure due to the pandemic, the revenue from advertisements has been hit. This factor has undoubtedly put these companies in a tough situation, but their ubiquitous usage and unparalleled data capture potential make them resilient in the long run.
Next is Apple, a monumental figure in consumer tech and renowned for its sturdiness in times of crisis due to its robust business model. Similarly, Microsoft, with its cloud business (Azure) and software sales, is expected to weather the storm with an unwavering performance.
Netflix and Amazon, the e-commerce and entertainment behemoths, have veered off into an unusual trend. With social distancing regulations, Amazon’s e-commerce sales have surged, and Netflix has seen a surge in subscriptions. That being said, these companies face their own set of challenges, especially regarding the sustainability of these increased demands once the pandemic eases.
Tesla, the electric car giant and the latest entrant in the Magnificent 7 league, has had a roller-coaster ride on Wall Street. A company like Tesla, although part of the future’s green revolution, faces the most risk due to its relative nascent market and the uncertain economic times ahead.
Given the circumstances, the question arises whether to sell these stocks or not. The answer to this isn’t a straight ‘yes’ or ‘no.’ A lot relies on the individual investor’s portfolio, risk tolerance, and financial goals.
For individuals heavily invested in these stocks, it may be a good time to assess diversification. Moreover, investors who need the cash or those nearing retirement might consider selling part or all of their holdings.
On the other hand, these massive tech entities have shown resilience and potential for growth in the long run. Their proven ability to adapt, combined with their financial power, indicates that they could come out strong post-pandemic. Therefore, investors in these stocks—especially those with a high risk-taking capacity or long term investors—might indeed want to hold on to these stocks.
In conclusion, the decision to sell or hold your Magnificent 7 stocks in the current situation is deeply personal and subjective. It should be an informed decision considering present stock performance, future company growth potential, and the investor’s individual risk tolerance and financial objectives. The ‘Magnificent 7’ might face challenges in the short term, but their potential for long-term growth cannot be underestimated.