New product launch of CSOP ETF: Bubble or legend? After splitting the 'Magnificent Seven' US stocks, we found...
Stock price surged 532%1 in five years
Annualized compound growth rate 45%1
"Magnificent Seven" dominates the market
Year-to-date contribution to Nasdaq's gains nearly 80%2
CSOP Asset Management to launch on November 6
Hong Kong's first Magnificent Seven ETF——
CSOP Magnificent Seven ETF
(Stock code:$CSOP MAG7(3454.HK))$CSOP MAG7(03454.HK)
Enabling Hong Kong investors to access
the legendary power of the Magnificent Seven for under HKD 1,000!
The "Magnificent Seven" include Alphabet (Google's parent company), Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla. With outstanding profitability and market position, these seven giants have attracted global capital in recent years. Solactive Magnificent Seven Index has surged 1881% since May 1, 2015, far exceeding Nasdaq Composite's 296% and S&P 500's 223%.
Index performance comparison
Source: Bloomberg, 2015/05/01 - 2024/09/27.
However, the skyrocketing gains have also raised concerns among investors, fearing an overvalued bubble.
Let's analyze whether the Magnificent Seven's surge is a mirage built on bubbles or a growth legend backed by fundamentals?
01. Analysis: Stock surge driven by earnings growth
Over the past decade, revenue growth and margin expansion have been the biggest drivers of the Magnificent Seven's stock performance. Their annualized gains reached 19%~75%, supported by 10%-53% revenue growth and margin expansion rates.
Magnificent Seven's decade-long dominance
Primarily driven by strong earnings growth
10-year CAGR attribution
Source: Bloomberg, CSOP Research, 2014/9/30-2024/9/27.
Recent Q3 earnings reports further reassured investors. As of October 31, six of the seven companies reported better-than-expected results. Tesla and Alphabet both exceeded market expectations, with Tesla's automotive business particularly strong, pushing its stock to a 13-month high. Microsoft, Meta, Amazon and Apple also reported better-than-expected quarterly revenue.
Magnificent Seven's Q3 2024 EPS all beat expectations
(Currency: USD)
Source: Bloomberg, consensus estimates as of 2024/10/31.
02.
Historical perspective: Valuations not at bubble levels
Looking back at historical bubbles like the Nifty Fifty in the 1960s, Japan's financial bubble in the 1990s, and the dot-com bubble in the 2000s, the average forward P/E of the top seven stocks was 34~67x, much higher than the Magnificent Seven's current 24x.
Magnificent Seven's valuations remain below historical bubble levels
Average forward P/E comparison
Source: Datastream, Factset, Goldman Sachs.
03. Future outlook: AI revolution unlocks greater potential
The Magnificent Seven not only lead in their core businesses but are also pioneers in the AI revolution, further expanding growth opportunities across infrastructure, edge AI, and software applications:
Infrastructure: Surging chip and cloud demand
Amid the generative AI model training boom, NVIDIA as the global GPU leader benefits most as the "shovel seller," while cloud giants Microsoft, Amazon and Google also benefit from computing demand. Google's latest earnings showed 35% cloud growth driven by AI investments.3
Edge AI: Bringing AI to devices
AI's expansion into consumer markets relies on innovations in devices like phones, computers and cars, where the Magnificent Seven excel. Examples include Apple's AI-powered iPhone 16, Microsoft's AI PC Surface, Google's Gemini-powered Android, and Tesla's autonomous vehicles.
Software applications: Office and advertising lead
In office software, Microsoft integrates AI into Copilot while Google offers Duet AI in Workspace. In advertising, Meta has developed a suite of AI tools to boost monetization. As technology spreads, we expect an AI application boom.
The Magnificent Seven's rise appears driven by earnings rather than speculation, with valuations below historical bubbles and AI providing future growth potential, making them still attractive investments.
How can investors capture the Magnificent Seven's growth momentum?
CSOP Magnificent Seven ETF (3454.HK)
Equal-weight exposure to continue the US stock growth legend!
Over the past decade, leadership among the Seven has rotated in stock performance and trading volume, with no permanent champion amid shifting trends.
Best performers among the Magnificent Seven over the past decade
Source: Bloomberg, 2024Q1-Q3 represents 2024/01/01 - 2024/09/30.
3454.HK employs a full replication strategy with equal weighting across all seven giants to track the Solactive Magnificent Seven Index, capturing each member's highlights.
Source: ^Solactive, CSOP, as of 2024/10/23
Notably, the index components are fixed as the "Magnificent Seven"—Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla, with quarterly rebalancing only adjusting weights to equal allocation, capturing market opportunities through timely profit-taking and bargain-hunting.
Who doesn't know their fame? Only bubble fears deter.
Earnings growth dispels rumors, market fluctuations reveal truth.
US stock leadership rotates, fortunes change in moments.
3454.HK encompasses all, continuing the Magnificent Seven legend!
Source: CSOP. * Forecast data for reference only. ** Trustee and registrar fees included in management fee. Note some fees may increase to allowed maximum with one month's notice. See "Fees and Charges" in Part I of the prospectus for details. #As the fund is newly established, this represents estimated recurring expenses over 12 months as percentage of estimated average NAV. Actual figures may differ and change annually. For the first 12 months, recurring expense ratio capped at 1% of NAV, with any excess borne by the manager.
[1] Source: Bloomberg, 2019/10/29-2024/10/29, using Solactive Magnificent Seven Index.
[2] Source: Bloomberg, 2023/12/30-2024/10/29, Nasdaq refers to Nasdaq Composite.
[3] Source: Bloomberg, company reports
$Magnificent Seven ETF - Roundhill(MAGS.US) $Trump Media & Tech(DJT.US)
Disclaimer
The product mentioned herein is authorized by the Hong Kong Securities and Futures Commission ("SFC"). Such authorization does not imply official recommendation.
This document is for general reference only and does not constitute investment advice or any form of offer. For investment advice, please consult professional legal, tax and financial advisors.
Investments involve risks. Past performance is not indicative of future results. Investors should read the fund's offering documents and key facts statement for details including features and risks. This document alone should not form investment decisions. Not for distribution where prohibited.
This document is not legally binding. CSOP disclaims liability for any losses from using this content. No copyright or intellectual property rights are granted. No reproduction or distribution without written consent.
The product may face geographic, market, industry or investment concentration risks. Compared to more diversified funds, its value may fluctuate more.
For index provider disclaimers, see the fund's offering documents. Prepared by CSOP, not reviewed by SFC.
Issuer: CSOP Asset Management Limited
The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.
