Latest news with #Mag7
Time of India
2 days ago
- Business
- Time of India
Hawkish Fed could inflict markets' biggest 'pain trades': McGeever
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel As the first half of the year closes, financial markets are in limbo, waiting to see how the kaleidoscope of global trade deals will - or won't - come together after July 9, when Washington's pause on its "reciprocal tariffs" expires. But if investors are wrong-footed, which trades will be the most vulnerable?The state of suspended animation in today's markets is remarkably bullish. U.S. growth forecasts are rising, S&P 500 earnings growth estimates for next year are running at a punchy 14%, corporate deal-making is picking up, and world stocks are at record uncertainty immediately following President Donald Trump's April 2 "Liberation Day" tariffs seems a distant memory. The relief rally has ripped for nearly three months, only taking a brief pause during the 12-day war between Israel and a pretty rosy outlook, some might say too rosy. If we do see a pullback, what will be the biggest "pain trades"?The major pressure points are, unsurprisingly, in asset classes and markets where positioning and sentiment are most overloaded in one direction. As always with crowded trades, a sudden price reversal can push too many investors to the exit door at once, meaning not all will get out in identify the most overloaded positions, it's useful to look at the Bank of America's monthly global fund manager survey. In the June survey, the top three most-crowded trades right now are long gold (according to 41% of those polled), long "Magnificent Seven" tech stocks (23%), and short U.S. dollar (20%).This popularity, of course, means these three trades have been highly "Mag 7" basket of Nvidia, Microsoft, Meta, Apple, Amazon, Alphabet and Tesla shares accounted for well over half of the S&P 500's 58% two-year return in 2023 and 2024. The Roundhill equal-weighted "Mag 7" ETF is up 40% this year, and the Nasdaq 100 index, in which these seven stocks' make up more than half of the market cap, this week hit a record the gold price has virtually doubled in the last two-and-a-half years, smashing its way to a record high $3,500 an ounce in April. And the dollar is down 10% this year, on track for its worst first half of any year since the era of free-floating exchange rates was established more than 50 years some ways, these three trades are an offshoot of one fundamental bet: the deep-rooted view that the Federal Reserve will cut U.S. interest rates quite substantially in the next 18 months, a scenario that would make all these positions though the Fed's revised economic projections last week were notable for their hawkish tilt, rates futures markets have been upping their bets on lower rates, largely due to dovish comments from several Fed officials and a sharp fall in oil prices. Traders are now predicting 125 basis points of rate cuts by the end of next at Morgan Stanley are even more dovish, forecasting no change this year but 175 basis points of cuts next year. That would take the Fed funds range down to 2.5%-2.75%.Lower borrowing costs would be especially positive for shares in companies that can expect high future growth rates, like Big Tech. Low rates are also, in theory, good for gold, a non-interest-bearing on the flip side, it's difficult to construct a scenario in which the economy is chugging along, supporting equity performance, while the Fed is also slashing rates by 175 on that scale and at that speed would almost certainly signal that the Fed was trying to put out a raging economic fire, most likely a severe slowdown or recession. While risk assets may not necessarily collapse in that environment, over-extended positions would be this isn't the first time investors have banked on Fed cuts in the past three years, and we have yet to see a major blow-up as a result. Markets have handled "higher-for-longer" rates much better than many observers warned, soaring to new highs in the if "pain trades" do emerge in the second half of the year, it will likely be because of one sore spot: a hawkish Fed.(The opinions expressed here are those of the author, a columnist for Reuters.)Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X.
Yahoo
4 days ago
- Business
- Yahoo
There Are Currently Better Options Than Microsoft
Microsoft Corporation (NASDAQ: MSFT) is one of the most well-known companies, belonging to the mag-7 and being the biggest company in the world according to market capitalization. While MSFT is definitely a great company, this article will show why it currently is not a buy for me, mainly because there are better deals in other mag-7 companies at lower valuations and better fundamentals. Warning! GuruFocus has detected 6 Warning Sign with MSFT. From a fundamental perspective, Microsoft is a strong company, with a gross profit margin of 69.7% and an EBITDA margin of 55.25%, far above the industry medians of 50.78% and 10.48%, respectively. Furthermore, the ROE is great at 33.61%, while the industry median is only at 4.96%. The same can also be said for growth. While MSFT is not as far ahead of other companies as it was in terms of profitability, a revenue growth rate of 14.13% and an EBITDA growth rate of 19.16% are still great. Furthermore, forward growth rates are even stronger than current ones, suggesting a positive outlook. Only ROE growth is a weak point in this sector, with both current and forward ROE growth expected to be negative. As with all Mag-7 companies, valuation is the biggest problem for Microsoft. Everyone already knows that we are talking about a great company, so the most important thing to get right is to find a good entrance price. Currently, the EV/EBITDA ratio of the stock is relatively high at 22.8, a 31% premium to the industry median. Moreover, the P/S and P/B ratios are even more elevated at 12.51 and 10.49, suggesting a 311% and 214% premium, respectively. The P/E ratio at 35.11 is also very high at the moment. Figure 1 shows the historical P/E ratio of MSFT as can be seen, the company currently trades at 2020 and 2023 levels, leaving it at a higher bound of its average valuation. When comparing Microsoft's user base to that of other Mag-7 companies, like Alphabet (NASDAQ: GOOG) and Meta (NASDAQ: META), one can instantly see that the company's valuation is elevated. At around 1.5 billion users and a market cap of 3.35T, the company has a valuation of $2.233 per user. At the same time, GOOG and META only have valuations of $820 and $494 per user, respectively, making them much cheaper in comparison. Additionally, ROE is a weak point too, with only Tesla Inc. (NASDAQ: TSLA) and Amazon (NASDAQ: AMZN) being worse at 8.79% and 25.24%, respectively. From a growth perspective, Microsoft is solid but does not particularly stand out at slightly better revenue growth but significantly less EBITDA growth than Alphabet. Furthermore, the negative ROE growth is the second worst in the peer group, with only Tesla's ROE falling by almost 70%. In total, Microsoft seems fundamentally somewhere around the average, with profitability being a strength while growth is a comparative weakness. Figure 2 shows the valuation metrics of Microsoft and its peer group. As can be seen, MSFT is one of the most expensive Mag-7 companies, having a higher EV/EBITDA and P/E ratio than everyone but TSLA and NVDA. In terms of P/S ratio, the company is even more expensive than TSLA, while it is only in the middle of all companies in terms of its P/B ratio. All of this makes a current investment in MSFT look rather bad. Meta, for example, is beating Microsoft in almost every category, with MSFT only slightly exceeding in EBITDA margins, having 4% more. At the same time, META trades at a discount between 15% and 30%, depending on the ratio. This very same example could also be done for GOOG, which has comparable metrics but a discount of almost 50%. Furthermore, GOOG has a far lower P/FCF ratio at 27.1 compared to that of MSFT, which is at 51.2, showing that the premium persists through multiple valuation metrics. This, in total, makes MSFT look very expensive. The only companies in this list looking like a worse deal are TSLA and Apple (NASDAQ: AAPL), which have worse profitability and growth at comparably high valuations. One of the major concerns for Microsoft is the company's big exposure to AI, due to its aggressive investments in this sector. While it could be a long-term growth factor, one should also consider the increased competition in the sector, with almost every company boosting AI investments. In contrast to other companies like Meta, which approaches the AI battle by focusing on a sector, in this case marketing, to gain an edge, Microsoft focuses on large language models, something most companies do. At the same time, the legal battle between Elon Musk and OpenAI, one of Microsoft's most important AI investments, remains a concern, as Musk wants to stop OpenAI from becoming a for-profit company. Also, it remains questionable if Microsoft can continue charging premium prices for its M365 Copilot, while users have so many other alternatives. The same argument can also be made for the company's cloud business, where it faces strong competition from Amazon and Alphabet. Also, many companies are trying to cut costs on cloud spending to increase profit, which could further damage growth in this sector. All of this poses strong questions about whether a forward revenue growth rate of 14.30% and a forward EBITDA growth rate of 19.88% are justified. Apart from that, Microsoft is also not as immune to geopolitical tensions as one might think. While the trade deal between the US and China has decreased trade tensions for now, a new collapse in foreign relations remains a risk, as it could increase the costs of hardware for the company. Another item of interest could be that MSFT has seen increased insider selling over the past few months $47.9M sold during the last 3 months. Additionally, the famous hedge fund manager and value investor Ken Fisher (Trades, Portfolio) has recently reduced his position in MSFT by 10%. Furthermore, George Soros (Trades, Portfolio) completely cut his position in the company by the end of March. From a technical perspective, MSFT looks fine but not great. Although 6-month and 1-year momentum are positive, they are not extremely high. Figure 3 further shows that the company is trading above its 200-day simple moving average, indicating lower volatility and higher returns. However, it is currently at a resistance at $454 and could bounce back from here. Furthermore, even if it manages to break through this level, we still have to see prices above the resistance of $467 to be able to speak of a new uptrend. In total, MSFT looks like a much worse deal than other Mag-7 stocks like META and GOOG at the moment, which trade at similar multiples, while having similar or even stronger fundamentals. Because of this, I give MSFT a sell rating as it is likely time to shift funds into other Mag-7 companies, especially with the current resistance being a barrier at the moment. This article first appeared on GuruFocus. Sign in to access your portfolio
CNBC
18-06-2025
- Business
- CNBC
Investors are buying Amazon and low-volatility ETFs as uncertainty reigns supreme
(This is a wrap-up of the key money moving discussions on CNBC's "Worldwide Exchange" exclusive for PRO subscribers. Worldwide Exchange airs at 5 a.m. ET each day.) Investors are looking for opportunities in the Magnificent Seven and for ways to play the potential for more volatility in the market with Middle East tensions continuing. Worldwide Exchange pick: Amazon (AMZN) Jeff Kilburg of KKM Financial said Amazon is a smart buy even in a volatile market and credits its year to date decline to profit taking. "The way they are doing custom chips, the way they are approaching AWS (Amazon Web Services) … I'm excited," said Kilburg. "Going back to Q4, Q1 of this year I was pounding the table concerned about Mag 7 being overconcentrated. What have we seen? A massive repricing, reevaluation of Mag-Seven. Right here, right now it makes sense." According to FactSet, Amazon trades just below 32 time forward earnings. On Jan. 28, it traded at nearly 38 time forward earnings. The Fed and the bond market Philip Straehl of Morningstar sees opportunity in intermediate bonds in the current market environment. "The fiscal backdrop has been a source of some volatility on the long end, we like Treasurys as an investment we, we do favor the intermediate part of the curve," said Straehl. "We continue to think the news cycle around the budget bill that is going to make its way through Congress in the weeks to come is going to provide an impetus for a bit more volatility." Straehl added the short end of the curve could become more attractive if the Federal Reserve has a more hawkish outlook than expected. Lauren Goodwin of New York Life Investments sees continued volatility in the bond market, especially at the long end of the curve due in part to foreign investors reducing their purchases. "The dynamic … is real, it is happening. We are seeing it not only among retail but the most sophisticated institutional investors even if it's just on the margin questioning their geographic allocation," she said. Goodwin added she doesn't expect the Fed to respond to this trend in the near term, but they could take action in the future. "The role that the Fed could play in the long term is a buyer of last resort. Engage in some financial repression with respect to maintaining some Treasury market volatility. We don't think we are anywhere near that stage in policy management of the issue. We anticipate that dollar depreciation will continue on the margin … Treasury market volatility especially on the long end is a reality for investors." Investing in Low Volatility ETFs Steve Sosnick of Interactive Brokers believes investors need to consider investing in low-volatility stocks and ETFs due to the geopolitical uncertainty. "Lower Beta, high divided stocks are definitely a way to stay invested while insulating yourself," Sosnick said. "High Beta is great when the market is going up, but not when the market is floundering. If you want to stay invested dividends provide a lot of ballast." Sosnick highlighted the Vanguard Russell 1000 Value ETF (VONV) along with the Vanguard U.S. Minimum Volatility ETF (VFMV) as two ways to the play the current market environment. Both have outperformed the S & P 500 year to date.
CNBC
12-06-2025
- Business
- CNBC
Best Stocks: A cybersecurity giant with a red hot AI business and shares poised for a breakout
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — We've written about two cybersecurity giants in our Best Stocks column in recent weeks, CrowdStrike and Zscaler, both of which remain on the list and represent solid leadership within the software industry group. If you've been making money on those names, you'll be delighted to hear that we've got another write-up in the group. When Palo Alto Networks (PANW) hit the list last week, Sean was pumped to get the opportunity to talk about it. Palo Alto is a 20-year old company that was added to the S & P 500 in 2023. It is currently the largest cybersecurity stock in America with a $130 billion market cap, just ahead of CrowdStrike. With Palo Alto, investors get three businesses in one: Strata is their network security platform while Prisma secures the cloud. And then there is Cortex, the AI and automation business, which is currently on fire. Last week CEO Nikesh Arora, one of the most respected executives in Silicon Valley, announced a consolidation of Prisma under the Cortex brand in order to underscore the importance of AI within the company. Speaking at the Bank of America Global Technology Conference on June 3rd, Arora reaffirmed Palo Alto's target to double the business over the next five years. This is a strong stock in a strong sector. Sean's going to lay out the backdrop for you and then share some stuff about why this name is acting so well. Best stock spotlight: Palo Alto Networks Inc (PANW) On the list since: 6/6/2025 Sean — Tech is increasingly becoming the engine of this market. Tariffs may be dominating the headlines, but tech has held its ground, continuing its relative strength that we've seen over the past decade. Via Factset, first-quarter earnings reported by the Mag 7 exceeded estimates by 14.9%, compared to 8.2% for all S & P 500 companies. The Mag 7's actual earnings grew 27.7% from the same period a year ago. Alphabet, Amazon, and Nvidia were among the top 5 contributors to earnings growth for the S & P 500 in Q1. Within the Mag 7, the software-oriented names have outperformed the hardware/discretionary names: The top 2 performers YTD are Meta up 20% and Microsoft up 13%, while the bottom 2 performers are Apple down 19% and Tesla down 18%. Within tech, software is one of the best-performing industries. The iShares Expanded Tech-Software Sector ETF (IGV) , a popular Software ETF, is up 7% YTD and up 33% over the past year, compared to the Invesco QQQ Trust (QQQ) up 4% YTD and up 12% over the past year. Looking at all software-classified stocks within the S & P 500, 90% are currently trading above their 50-day moving average, and 68% are above their 200-day moving average. These stocks sit a median of 9% below their 52-week highs and have a median Relative Strength Index of 58. In comparison, the QQQs show slightly weaker breadth: 85% of its constituents are above their 50-day moving average and 63% are above their 200-day. The Qs are a median 13% below 52-week highs, with a median RSI of 59. This indicates that while both groups are exhibiting strength, Software stocks within the S & P 500 are showing slightly better technical positioning relative to the broader tech-heavy index. Software is the best-in-breed of an already high-performing tech sector. On our list, software makes up the most populous industry with 9 companies: ANSS , CDNS , CRWD , INTU , MSFT , PANW , PLTR , ROP , and ZS . Major breakout? PANW was added to the list late last week. Palo Alto Networks is a platform-based cybersecurity firm focused on network security, cloud security, and general security operations with over 80k enterprise customers. This is PANW's quarterly gross profit since inception, up and to the right: As of PANW's latest earnings report, the company reported $5 billion in annualized recurring revenue (ARR) from its next-generation security (NGS) offerings — a 34% YoY increase. The company expects this momentum to continue, projecting $5.52 billion to $5.57 billion in ARR for Q4, representing 31–32% growth. This strong performance is being driven by demand for AI-powered security solutions, SASE, and software firewalls. The company is also seeing deep traction with large enterprises: 130 customers now generate over $5 million in ARR, and 44 bring in over $10 million. Management's strategy is to have 60–70% of ARR come from these "platformized" clients, supporting long-term scalability and revenue durability. According to management, with this growth trajectory and customer engagement, Palo Alto remains confident in its path toward a $15 billion ARR target by fiscal 2030. (data via Quartr) The stock just recently bounced off its 50- and 200-day moving average. If it can get to the $200 range, we could be in for a major breakout, joining an elite software industry thus far in 2025. Risk management Josh — That bounce Sean is referring to happened exactly where the bulls needed it to. After PANW reported earnings on May 20th, it gapped lower but the buyers stepped up at the $182-$185 level. They bought it at the 200-day and it never closed below. I'd keep it simple and watch for a close below to tell me something's changed. As far as an entry is concerned, a true technician would wait for the breakout above $200 and watch for convincing volume before starting a position. The risk of anticipating the breakout is more chop below that level and potentially being stopped out. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
Business Insider
08-06-2025
- Business
- Business Insider
The Week That Was, The Week Ahead: Macro & Markets, June 8, 2025
Everything to Know about Macro and Markets Stocks clocked in large weekly gains, returning to positive territory year-to-date. The Dow Jones Industrial Average (DJIA) rose by 1.17%, the S&P 500 (SPX) increased by 1.50%, and the tech-heavy Nasdaq-100 (NDX) gained 1.97% for the week. The S&P 500 finished more than 20% above April's low, reclaiming the 6,000 mark first reached in February, although it remained about 2% shy of its record high. Confident Investing Starts Here: Macro Steers the Markets The week began on a positive note, losing some steam in the second half. The weakness in PMI reports – with the manufacturing activity contracting for a third month in a row and services activity shrinking for the first time in 11 months – infused some gloom. However, Friday saw stocks find their footing again on solid job gains, which allayed fears about an imminent economic downturn. U.S. jobs growth stayed strong in May, climbing 139,000 with unemployment unchanged at 4.2%. Although the March and April reports were revised downward, May's report reassured investors, as it reflected a very gradual cooling of the labor market. Still, diving into the job report's details, a stronger-than-expected wage growth continues to put a floor under inflation. This supports the Federal Reserve's 'wait and see' stance, despite President Trump's demands for a cut. According to the CME FedWatch Tool, the chances of a June cut are nil, and July's rate decrease looks increasingly improbable. Prices in interest rate futures markets imply that investors expect two quarter-point rate cuts by year-end, with the first cut not expected until September. Wrapping Up the Season Despite tariff headwinds and macro volatility, S&P 500 companies delivered solid results last quarter. Index members reported 12.9% year-over-year earnings growth – the second straight double-digit increase. 78% of firms – above the five-year average – exceeded EPS estimates. However, the number of companies issuing negative EPS guidance (68) was also above the average. In Q1, the Healthcare sector reported the highest earnings growth, 43%, leaving the Magnificent Seven cohort's 27.7% increase in the dust. In fact, Mag 7's earnings growth rate was below the average (32.1%) of the previous three quarters. Still, three members of the Magnificent bunch – Alphabet (GOOGL), Amazon (AMZN), and Nvidia (NVDA) – are among the top five contributors to earnings growth for the S&P 500 for the first quarter. Interestingly, Bristol Myers Squibb (BMY) and Gilead Sciences (GILD) were the other top contributors. Stocks That Made the News ▣ Tesla (TSLA) lost nearly 15% over the week following the ugly social media spat between Elon Musk and President Donald Trump. The feud flared up over the impending budget bill, with Musk calling it 'disgusting', and followed by Trump's threat to take away billions of dollars in government subsidies and contracts awarded to Musk's businesses. Although shares rebounded on Friday as Musk and Trump moved to cool tensions, the spat cost Tesla over $150 billion loss in market cap. ▣ Broadcom (AVGO) fell on Friday, wiping out its weekly gain, after the chip giant only narrowly surpassed analyst revenue and expectations. In addition, its current quarter revenue guidance was also just above consensus. Solid, but not a blowout quarter and outlook, weighed on shares that recently hit all-time highs. Still, the company delivered on the AI narrative, reporting surging demand and upping AI networking revenue guidance. ▣ Microsoft (MSFT) continued its climb, hitting a fresh record on Friday as analysts raised price targets on acceleration in Azure and AI-related revenue growth. According to Goldman Sachs, Microsoft's cloud revenue could more than double by 2029. The tech leader's market cap has reached $3.5 trillion, surpassing that of Nvidia (NVDA) and making MSFT the largest company in the world. ▣ Lululemon (LULU) shares dove by 20% on Friday, capping large weekly losses, despite earnings beat. The apparel retailer cut guidance on macroeconomic uncertainty and the impact of tariffs that might force LULU to increase prices. ▣ DocuSign (DOCU) was another notable decliner, sinking nearly 19% post earnings. The company reported a strong financial performance, but a miss on billings raised investor fears about future growth. The Q1 2025 earnings season is practically over, but several notable earnings releases are still scheduled for the next few days. These include Casey's General (CASY), Oracle (ORCL), Chewy (CHWY), and Adobe (ADBE).
