{"id":42392,"date":"2023-11-05T12:14:45","date_gmt":"2023-11-05T12:14:45","guid":{"rendered":"https:\/\/innodebt.com\/investing\/why-todays-magnificent-seven-stocks-have-mediocre-long-term-prospects-at-best\/"},"modified":"2023-11-05T12:14:48","modified_gmt":"2023-11-05T12:14:48","slug":"why-todays-magnificent-seven-stocks-have-mediocre-long-term-prospects-at-best","status":"publish","type":"post","link":"https:\/\/innodebt.com\/?p=42392","title":{"rendered":"Why today\u2019s \u2018Magnificent Seven\u2019 stocks have mediocre long-term prospects at best"},"content":{"rendered":"
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\n \u201c<\/span> \u201cWhoever coined the expression \u2018Magnificent Seven\u2019 for these companies presumably didn\u2019t see the movie.\u201d\u201d<\/span>\n <\/p>\n


\n \u2014 Robert Arnott<\/span>
\n <\/small><\/p><\/div>\n<\/p><\/div>\n

We have no idea which companies will dominate the stock market a decade from now \u2014 the \u201cMagnificent Seven\u201d of 2033, in other words.<\/p>\n

But we have a good idea which companies won\u2019t be on that list: today\u2019s Magnificent Seven \u2014 Microsoft
\n MSFT,
\n +1.29%<\/bg-quote>,<\/span>
\n Apple
\n AAPL,
\n -0.52%<\/bg-quote>
\n Amazon.com
\n AMZN,
\n +0.38%<\/bg-quote>,<\/span>
\n Nvidia
\n NVDA,
\n +3.45%<\/bg-quote>,<\/span>
\n Alphabet
\n GOOGL,
\n +1.26%<\/bg-quote>.<\/span>
\n Meta Platforms
\n META,
\n +1.20%<\/bg-quote>,<\/span>
\n and Tesla
\n TSLA,
\n +0.66%<\/bg-quote>.<\/span>\n <\/p>\n

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That\u2019s because it\u2019s rare for the largest companies to still be among the largest in a decade\u2019s time. On the contrary, the largest companies in a given year will lag the market on average over the subsequent decade.<\/p>\n

These are the results of research conducted by Research Affiliates, the investment firm headed by Robert Arnott. He and fellow researchers focused on the 10 largest-cap companies at the beginning of each decade since 1980. They found that, on average, eight of those 10 were gone from the top-10 list by the end of that decade. Furthermore, the average 10-year performance of all 10 was significantly below that of the overall U.S. market.<\/p>\n

If the future is like the past, we should expect that perhaps one, maybe two, of the current Magnificent Seven will be in an equivalent list in 2033. Meanwhile, a portfolio of all seven should lag the market over the coming decade.<\/p>\n

What accounts for this result? There are several contributing factors:<\/p>\n