The Magnificent Seven wasn’t just a big part of markets last year. The Magnificent Seven contributed to over half of the S&P 500’s growth. Of course, the Magnificent Seven itself may just be a handy bit of media branding.
Still, investors may be asking themselves what to do about the stocks this year. The Magnificent Seven remain big players in the stock market, but knowing when and how to use them matters for 2024.
See more: T. Rowe Price’s Coyne on Active ETFs in 2024
First, while there is a degree of similarity connecting the Seven, they aren’t the same. On a panel at the recent ETF Exchange conference, T. Rowe Price CIO Eric Veiel pointed out that while market watchers can try to connect the Seven with loosely connected themes like AI, the companies are actually all quite different.
Take Nvidia (NVDA), for example. The firm has been red hot. It really is a company boosted by AI. Whereas a different company in the Mag Seven, Amazon (AMZN), relies much less on AI. Its e-commerce scale and volume are much more responsible for its strong numbers in 2023. Meanwhile, Tesla (TSLA) stands out from both as an electric vehicle business, primarily.
Sticking with TSLA, the firm has — to some degree — fallen out of that seven as its numbers have slowed. For some, healthcare behemoth Eli Lilly (LLY) is taking its place.
So, if the Magnificent Seven, with big names like NVDA, AMZN, and LLY, continue to lead the way in this odd stock market environment, how should investors move forward in 2024? Active ETFs can provide one intriguing route in. T. Rowe Price’s fundamental approach, taking a bottom-up look, matters a lot when deciding how to approach such large firms with an outsize impact on the stock market.
The T. Rowe Price Blue Chip Growth ETF (TCHP ) provides one intriguing way to approach key firms like the Magnificent Seven. TCHP holds the Seven but weights them differently than the index based on proprietary fundamental research. For example, the portfolio has LLY at a higher weight than TSLA. The actively managed portfolio also favors other stocks and allocation weights that go beyond the limits of the S&P 500’s market-cap weightings.
TCHP charges only 57 basis points for its active approach of looking for high-quality blue chip companies with strong management teams and sound fundamentals. For those investors looking for an approach to the Magnificent Seven and other blue chip stocks, TCHP could be a strategy to watch.
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