Last year, every major index plunged into bear market territory. While they eventually reversed course, the S&P 500’s gains were driven by just a handful of stocks. The so-called Magnificent 7 sticks are a group of mega-cap tech stocks identified by Bank of America (NYSE:BAC) Chief Investment Strategist Michael Hartnett as providing all the lift the stock index enjoyed. Without their gains, the S&P 500’s performance would have been essentially flat.
Specifically, the Magnificent Seven stocks are Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA). The broad market index is weighted by market capitalization. These seven stocks have a combined weighting of 28% in the S&P 500. It means their performance applies outsized influence on the index — for good or bad.
The index pulled back once again since peaking at the end of July. However, most of that is due to Tesla tumbling 17% over the past three months. It’s only slightly offset by Amazon’s 7% gain. And that only came in the past week or so after it reported earnings. Before that, the seven stocks were down a collective 12.5%.
Of course, all the stocks are still sitting on enormous gains for the year, but the companies all still have rich valuations. Most sit well above the S&P 500’s 24.2 price-to-equity (PE) ratio. The following three stocks carry the highest PE ratio. Should you buy them? Let’s dig in and find out!
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Despite being the one Magnificent Seven stock to lose the most value, electric car maker Tesla still carries a lofty valuation. Its PE ratio is 68 — almost three times greater than the S&P 500.
Tesla’s downfall began after its second-quarter earnings report. It said gross margins fell…
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