r/valueinvesting
Mag Seven to Lag Seven: When ‘One Decision’ Stocks Stumble - wsj
WSJ compares Magnificent Seven to 1970s Nifty Fifty, warning of high valuations and potential long-term underperformance.
- Simple average P/E multiples are lower than the 1970s Nifty Fifty peak of 47x.
- Mag 7 are losing momentum and trailing the broader market in 2026.
- Valuations are stretched, especially on a price-to-sales basis at 11x.
- Historical parallel to the Nifty Fifty suggests potential long-term underperformance.
(Please resist the urge to comment for reading the whole article. Dankeschön!)
Mag Seven to Lag Seven: When ‘One Decision’ Stocks Stumble - wsj
By Spencer Jakab
June 24, 2026 at 6:38 am ET
https://www.wsj.com/finance/stocks/mag-seven-to-lag-seven-when-one-decision-stocks-stumble-e20f3103
Paging Rip Van Winkle
Now that’s what they call “stocks for the long run.”
Wharton School finance professor Jeremy Siegel, a cheerleader for staying invested as the 1990s bull market bubbled higher, made a surprising argument at the time. The boom-and-bust Nifty Fifty stocks of the early 1970s, long trotted out as a cautionary tale of falling in love with one group, weren’t so bad.
And he was right—as long as you held on. By 1997, a quarter-century later, the group of “one decision” stocks had recovered from their losses to post handsome returns just shy of owning the entire S&P 500.
A few have since vanished—Polaroid, Sears and J.C. Penney—but many remain household names, including Eli Lilly, Coca-Cola, Procter & Gamble, Walt Disney, IBM, Dow Chemical and McDonald’s. All were large, stable companies in 1972, which is why they were embraced by brokers and fund managers when the rest of the market was scuffling. Small companies had been especially out of favor.
They sound a lot like the dominant stocks of the past few years, the Magnificent Seven. In both 2023 and 2024, more than half of the S&P 500’s return came from them alone. But they started losing momentum last year and are trailing the rest of the market so far in 2026.
Will we be kicking ourselves in the year 2050 for not buying Apple, Amazon, Tesla, Meta, Alphabet, Microsoft and Nvidia shares to the exclusion of everything else?
Comparisons often turn to valuation. The Nifty Fifty fetched about 47 times earnings at their peak, which is higher than a simple average of today’s champs. A multiple of revenue, on the other hand, makes the current wonder stocks seem much more expensive at 11 times trailing sales.
Sentiment trumps value in the short run. If the Magnificent Seven or any other hot theme were to trail the market as badly as the Nifty Fifty did in the mid-1970s, many investors wouldn’t stick around until they caught up. It’s much easier and cheaper today for individuals to sell and move on to the next thing than it was 50 years ago.
And, even if the Magnificent Seven are as resilient as those blue chips of yesteryear, it’s unlikely they’ll have as smooth a ride. The early 1970s group spanned industrials, consumer goods, retail and technology. The Magnificent Seven are far less diversified, lifted to some extent by the same trend: artificial intelligence.
Yes, AI is transformative, and companies like Nvidia are exceptional. The same was said about the internet and Cisco, which became the world’s most valuable company in 2000. It had a superb CEO, dominated its market and its sales kept growing, but Cisco’s shares only regained their peak last year, a quarter century later.
There’s no such thing as a one-decision stock.
(Please resist the urge to comment for reading the whole article. Dankeschön!)
TLDR: valuation matters.