Ask the Fool: Meet the Magnificent Seven
Q. What are the “Magnificent Seven” stocks? — J.H., West Palm Beach, Florida
A. The “Mag 7” are a group of huge, high-profile technology companies: Google parent Alphabet, Amazon, Apple, Facebook parent Meta Platforms, Microsoft, Nvidia and Tesla.
There have been many such groupings of stocks over the years. An early one was the “Nifty 50” in the 1960s and 1970s: blue-chip stocks that included Coca-Cola, General Electric and Xerox. In 2013, the “FANG” acronym debuted to refer to Facebook, Amazon, Netflix and Google — later expanded to include Apple, becoming FAANG, and then amended again (swapping Microsoft in for Netflix) to become MAMAA: Meta Platforms, Apple, Microsoft, Amazon and Alphabet.
Other groupings that aim to include more artificial intelligence (AI) and semiconductor businesses include MANGOS (Meta Platforms, Anthropic, Nvidia, Google parent Alphabet, OpenAI and SpaceX) and BATMMAAN (Broadcom, Apple, Tesla, Microsoft, Meta Platforms, Alphabet, Amazon and Nvidia).
Q. Where can I look up historical P/E ratios? — H.S., Henderson, Nevada
A. Multiple financial information sites track historical P/E data. For example, at Morningstar.com, you can search for a company and click on its “Valuation” tab to see the current P/E ratio (and other valuation measures), past years’ P/Es and the five-year average P/E. You might also check out sites such as HistoricalPERatio.com.
You’re smart to seek out such numbers because they can put current numbers in perspective, helping you see whether a stock seems undervalued or overvalued. For example, if Scruffy’s Chicken Shack (ticker: BUKBUK) has a current P/E of 12 and its P/E in the past has often been 16 or higher, it’s looking undervalued. (Never base investment decisions on just one or two numbers, though.)
Fool’s school: Save more, spend less
Anyone aiming to sock away more for retirement or reach some other financial goal probably needs to save more and/or spend less. Here are a bunch of ways you might do that.
- Take a comprehensive inventory of your spending, in part by reviewing bank and credit card statements. This can help you see where you might cut back on your spending, such as by canceling subscriptions you no longer use.
- Automate much of your financial life, having certain sums automatically sent from your paycheck or bank account into retirement and/or investment accounts.
- Spend some time seeking better deals on insurance policies, internet and phone services, credit card interest rates and other recurring expenses. The great deal you found two years ago may no longer be best.
- Shift your shopping habits. Don’t view shopping as entertainment or a hobby.
- Invest in some healthy and growing dividend-paying stocks. They’ll regularly provide cash for your financial accounts.
- Take on a side gig for a short or long while; ideally, it should be one you enjoy.
- Eat out (or order in) less often. Just eliminating one $75 restaurant meal per month will save you $900 per year.
- Pay off high-interest-rate debt, such as credit card bills, as soon as you can. You’ll end up spending much less in total interest payments.
- Call a time-out before making any significant purchase. See if you still want it after a week or a month.
- Ask for a raise at work — many who ask for one get it. It helps both to deserve a raise and to make a solid case for one. Then, if you can, put any increased money right into your savings.
My dumbest investment: Misunderstood “buy and hold”
My most regrettable investing move happened many years ago, when I misunderstood and misapplied the “buy and hold” philosophy, holding some stocks even after their companies went well and truly bankrupt. Some of my losers included Solazyme, First Marblehead and Walter Energy. With the first two, I got too attached to their stories and ignored the progressively worsening financials. With the last, I was lured by its unsustainably high dividend yield. — S., online
The Fool responds: The famous “buy and hold” investing adage can indeed be misleading because people shouldn’t just buy stocks and forget about them. It’s better to think of it as “buy TO hold” — so buy aiming to hang on for years (if not decades), but also keep up with your investments.
Especially watch for any red flags, such as worsening financials. A steep dividend yield can also be a warning, reflecting a stock that has plunged. (As a stock’s price drops, its dividend yield rises — until, in many cases, a struggling company reduces or eliminates its dividend.)
Red flags generally require further research to see what’s going on with the company.
Aim to keep your money invested in your best ideas, and sell when you’ve lost confidence.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Foolish trivia: Name that company
I trace my roots back to 1790, when the first flour company was established in America, importing its flour from England. Based in Boston, it was New England’s first food company. In the 1820s, I began milling flour from domestically grown wheat, aided by the 1825 opening of the Erie Canal; my flour took on its current legendary name in 1896. I moved to Vermont in 1984. Today, I’m 100% owned by my employees, and I’m a Certified B Corporation, meaning that I meet verified standards for social and environmental business practices. Who am I?
Last week’s trivia answer
I trace my roots back to 1838, when George Putnam launched a publishing house. Over time, there was much consolidation in publishing; I resulted from a 2013 merger between publishers owned by Bertelsmann and Pearson, which formed “the world’s largest publisher of consumer books.” There are 300-plus imprints under my roof, including Bantam, Crown, Dell, DK, Doubleday, Dutton, Golden Books and Alfred A. Knopf. My history features more than 80 Nobel Prize laureates and hundreds of the world’s most popular authors. I sell more than 600 million print, audio- and e-books annually. Who am I? (Answer: Penguin Random House)
The Motley Fool take: Amazon in the cloud
Amazon.com (Nasdaq: AMZN) has grown into a company recently worth $2.7 trillion. Yet its shares are still appealingly priced, with a recent forward-looking price-to-earnings (P/E) ratio of 23, well below its five-year average of 39.
The company has multiple strong growth opportunities, particularly related to AI. For years, Amazon Web Services (AWS) — its cloud-based web-hosting business, which now accounts for one-fifth of Amazon’s revenue but much more of its operating profit — has been the big driver of growth for Amazon’s stock. That area of its business remains strong; the segment grew by 37% in the second quarter, while the overall business generated 20% growth in net sales.
Not only is AWS looking more promising due to AI, but Amazon has also experienced encouraging growth in its emerging semiconductor chip business. The company reported triple-digit growth (year over year) for both its chip business and AWS’s AI business; both are at annual revenue run rates exceeding $25 billion.
Amazon is already a behemoth with $776 billion in revenue over the past four quarters, but it’s still growing, and AI could unlock the next phase of its growth story. The early success of Amazon’s AI-powered conversational shopping assistant, Rufus, is also helping on the e-commerce end. (The Motley Fool owns shares of and recommends Amazon.)
— distributed by Andrews McMeel Syndication
