Priced for perfection ?

The Magnificent 7 continue to pull the S&P 500 ahead. Even we, as value investors, need to admit that their stock market performance was mainly driven by outstanding earnings growth and not by multiple expansion. Going forward, consensus expects the Magnificent 7 to grow their topline at 12% a year over the next 3 years. This compares to a meagre 3% for the remaining companies in the S&P. This certainly deserves a valuation premium, but the question remains how much that premium should be. NVDIA trades at 34.9 times forward 12 months Price-to-earnings, Tesla 58.9, Microsoft 33.5, Meta 23.4, Amazon 42.4, Alphabet 20.7 and Apple 27.9 times. Looking at the fundamentals, we believe that we are not ( yet ) experiencing another Internet Bubble. However some of the Magnificent 7 may fall as they are priced for perfection leaving them no room for unforeseen fundamental hiccups.