The Magnificent Seven Emergence
The Magnificent Seven group has been the talk of Wall Street over the past year, driving the market’s rebound from 2022’s disappointing performance.
The FAANG group, later evolving into the Magnificent Seven, led by Meta Platforms, Amazon, Apple, Netflix, and Alphabet, received a significant boost with the accession of Microsoft Corp. and Nvidia Corp.
BofA Securities analyst Michael Hartnett christened these companies the Magnificent Seven in 2023, attributing Wall Street’s resurgence to their collective dominance, innovative edge, strong brand appeal, and financial prowess.
Assessing the Performance of the Magnificent Seven
The incredible rally of the Magnificent Seven has fueled speculation about the Ark Innovation ETF (ARKK), led by Cathie Wood, potentially missing out on this movement.
If an investor had invested $100 in each of the Magnificent Seven stocks at the start of March 2020, impressive gains would have been realized.
| Dollar Holdings (current) | Returns (in %) | |
| Alphabet | $217.35 | +117.35% |
| Amazon | $181.05 | +81.05% |
| Apple | $283.80 | +183.80% |
| Meta | $243.98 | +143.98% |
| Microsoft | $264.48 | +164.48% |
| Nvidia | $1,041.75 | +941.75% |
| Tesla | $421.24 | +321.24% |
| ARKK | $92.20 | (-7.80%) |
A $700 investment in the Magnificent Seven would have yielded a 279.09% return by now, dwarfing ARKK’s negative 7.80% return. Such compelling figures naturally prompt investors to question if ARKK has indeed missed out on the brilliance of these companies.
ARKK’s Position and Performance
ARKK, known for investing in disruptive innovation, holds Tesla as its second-largest stock, but the fund cashed out of Nvidia, citing overvaluation. The ETF has undergone a tumultuous ride, soaring during the pandemic only to experience a prolonged downturn from 2021 to the end of 2022.
ARKK’s stagnation during the revival of the Magnificent Seven raises concerns about its investment strategy and its ability to adapt to the changing market dynamics.
In the recent market session, the Invesco QQQ Trust, tracking the Nasdaq 100, outperformed ARKK, reflecting the dwindling confidence in the latter’s performance.
Conclusion
As investors analyze the meteoric rise of the Magnificent Seven and the lackluster trajectory of ARKK, questions loom about the fund’s resilience and adaptability in navigating the evolving market landscape. With the Magnificent Seven leading the charge, ARKK’s underperformance has ignited a fervent debate about the fund’s future role in the ever-changing stock market panorama.