MAGNIFICENT 7: Wake up and smell the money!

In the world of finance, “The Magnificent Seven” refers to 7 of the largest and most influential technology companies that have had a significant impact on the stock market and the global economy. Five (5) of these companies have recently had significant stock buybacks.

WHY DID THEY BUY BACK THEIR OWN STOCKS?

1. Confidence in the Company: Buybacks can signal to the market that the company’s management believes in the long-term value and stability of the company.

   
   

2. Share Price Boost: Buybacks reduce the number of shares outstanding, which can create relative scarcity, increase earnings per share (EPS) and boost the company's share price.

   
   

3. Tax Efficiency: Compared to dividends, buybacks can be a more tax-efficient way to return capital to shareholders.

HOW CAN ANYONE RIDE ON THE SHOULDER OF THESE GIANTS?

✅ The obvious but riskier option is to buy into these stocks directly. For passive investors, this option is not recommended because of the high share price after buyback, market timing risks, lack of diversification and opportunity cost. Experienced investors understand these risks and are better suited to manage them.

✅ A less risky alternative is to buy Exchange Traded Funds (ETFs) indexed to S&P 500 on NYSE, Nasdaq, TSX etc. This means virtually any investor can own small portions of the magnificent 7 (and other stocks) at a lower price point and with little/no experience required.

Reach out to set up a tailored investment that suits your risk profile and delivers optimal returns with the best tax benefits.

Photo credits: Visual Capitalist

Other Updates:

Magnificent 7 Market Cap as a Share of the S&P 500