January 2025 Newsletter

MAG 7?

Much attention has been given to these 7 stocks and deservedly so since they make up about 33% of the S&P ‘s current value. Here is my take on each one.

Apple: Apple (7.5% of the S&P 500) has done a fantastic job at producing devices that just work. The software environment in their devices rarely needs a reboot and is extremely reliable. Market share is hard to maintain, they are adding an AI button. Some complain that they should have produced their own AI which so far, they have not.

Nvidia: Nvidia (6.75% of the S&P 500) started as a computer game and graphics company. They produced GPU’s (graphic processing units). The graphics that computer games required lent itself perfectly to AI (Artificial Intelligence) development and implementation. They have a lead, and AI is just getting started.

Microsoft: Micro (6.31% of the S&P 500) has been around as long as PC’s have been. They still in my opinion are a monopoly, basically it’s impossible to use a PC without them. They invested wisely in AI, and it is paying off.

Amazon: Amazon (4.15% of the S&P 500) just keeps chugging along. What is not appreciated is their huge investment in computer power, their AWS (Amazon Web Services) division is huge and their AI pursuits are huge also. Amazon has done a fantastic job at adding convenience to our shopping.

Meta/Facebook: Meta (2.72% of the S&P 500) has kept busy building their brand and many of their early acquisitions have kept them growing. Instagram might be the best acquisition they have made. They are investing heavily in AI and plan to keep adding eyeballs to get more ad revenue.

Alphabet/Google: Alphabet (2.27% of the S&P 500 ) still leads in search and search advertising. They have a fleet of vehicles (Waymo) whom completes over 100,000 paid autonomous auto trips per day and they are expanding. Their mains profit driver remains search and advertising.

Tesla: Tesla (2.23% of the S&P 500) sold fewer cars in 2024 than they did in 2023. Investors are laser focused on their autonomous driving efforts. They are a software company at heart. When and if they solve self-driving and add to that their robo fleet they will own the self-driving software world. Legacy auto companies may eventually just license the software. They could become to self-driving what Microsoft is to PC’s.

You might ask why such a high percentage of the stock market is tied up in so few companies. The long and short answer is growth and the potential for much more growth. Nothing makes profit margins like software once it is developed and adopted.

January 2025 started rocky for most stocks. The economy looks good and the profits for most companies are growing. Unless inflation really becomes a problem, I look for a good year for stock investors.

Thanks,

Andy McClung CFP TM
Slickcharts.com; Smartasset.com; SherlySeth nasdq.com