The markets sure took a turn, didn't they?
After nearly falling off a cliff... they surged last week on a huge rally in the Treasury market.
As bond prices soared, yields fell... bolstering equity markets in their wake.
What remains to be seen, however... is whether this rally can continue into the end of the year.
With the market on a knife's edge between a rally and a rollover...
It's time for a look at the "Magnificent Seven."
I'm talking about Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA).
These heavyweights of the S&P 500 led the market rally this year... but are they BUYS or NOT right now?
From my absolute favorite to the one that should be thrown in the trash...
I break down exactly what investors should do with each. From which ones are buys to what prices to look for... I cover it all.
See which of the "Magnificent Seven" are still magnificent... and which are mediocre or miserable.
It's all in my latest Buy This, Not That video.
Click on the image below to watch it.
Transcript
Hi, Shah Gilani here, with your weekly "BTNT" or "Buy This, Not That." It's Tuesday after the close. It's already dark outside, but it's not dark as far as the stock market is concerned. It's showing signs of life because we've had a tremendous bond market rally. And as bonds have rallied and yields have come down, equity prices have gone back up... because that's what they wanted to see.
They wanted to see lower yields, lower rates, and that's what we're getting with bond prices screaming higher, but, hmm, we'll see where that goes, how far that goes.
The reason we've seen this rally based on the bond market rallying is the CFTC at the end of October showed that leveraged funds held record short amounts of Treasury bonds. More than since 2006. That's how short leveraged funds work.
So any issuance pulled back from the Treasury, and they did say they had maybe less issue, which remains to be seen down the line and a couple other good news items caused Treasury bonds to rally. And so all of those shorts had to cover. So we've seen the 10-year go from 5% down to 4.57% and the stock market loved that.
So what remains to be seen is whether there's enough energy for this rally to continue. Let's get into that for this week's BTNT. Again, it's Tuesday after the close, November 7. So the prices I'm giving you are as of today's close. What we're gonna cover this week... the Magnificent 7 because it's time to look at them again.
First up, Microsoft.
Mr. Softie, MSFT, is the symbol, you all know that. I don't need to go any further, people, it's a BUY. It's always a buy to me.
This is my stock. This is my favorite stock. It's been my favorite stock for more than a decade and I've been handsomely rewarded because of it.
The company's just hitting it out of the park.
It's everything AI that people are talking about... AI, the narrative of AI. There's a lot of hype in the AI stories, a lot of rubbish and kind of red herrings as far as AI.
Microsoft's the real deal. It's got it incorporated in its Office Suite. It's got it incorporated in its hardware. It's got it incorporated in the cloud.
AI is going to push Microsoft higher. I think Microsoft can double from here, as big as it is, as huge as this market cap is, I think it can double from here in two years.
That's barring a recession and the market dipping pretty hard on some kind of ugly recession. So worst case scenario, Microsoft is going to double in four years. Worst case, that's an annualized 25% return. So Microsoft is Buy right here.
The close today was $360.53. The 50-day is $330, so it's well above its 50-day, but the 200-day is $308, so it's well above its 200-day.
Now, this is a behemoth of a company. It's got $143... we'll call it $144 billion in cash.
Yes, it's got some debt north of $100 billion, but the average yield or interest cost on that debt probably in terms of well, the short nature to the long nature, probably maybe on the high end is 3.5% because it is AAA rated and it raised a lot of that debt when yields were practically nothing. So Microsoft's debt service is so easily manageable, it's a joke. They manage it probably two times off with what they can make on their cash.
It has a beautiful balance sheet. Cash is king. It's always gonna be king. If the market falters, cash is gonna be even more king.
If we fall into recession, cash is gonna be king. If rates remain higher, cash is gonna be king. Microsoft people, it's a buy, it's a buy right here.
If you're nervous about the market, and I think really we're sitting on a knife edge as far as the market goes, we could see a year-end rally.
Given what we've just seen in the last few days, we could see the market continue to go higher on short recovery and then that could bring in, as prices go higher, we see some momentum. We can see sideline money come in. Some of that money in money market funds might come in. We could see a year-end rally into a Santa Claus rally.
It could be robust, it could even be a melt-up, entirely possible. By the same token, we got the 10-year auction tomorrow on Wednesday. We got the 30-year auction later in the week. If they don't go well, all bets are off.
If those auctions are a bust and investors don't wanna step up to buy the 10-year or they don't wanna step up to buy the 30-year and yields go back up, yields go back up a lot more than expected, guess what? That's gonna scare the bond market 'cause it knows there's a heck of a lot more Treasury issuance coming and if it's gonna have the same reaction, if market participants are gonna react the same way to upcoming issuances, it's gonna be a problem for the bond market, which means it's gonna be a problem for the stock market. So we're kind of on the knife edge here to go either way, but Microsoft doesn't matter what the market's going to do or does because Microsoft is what it is.
It's a must-own stock, a must-own company. So there you go. If you want to wait, maybe buy a piece here because it's a buy right here and it's not far off of its highs, people because Microsoft, its 52-week high was pretty recently, so we're looking at again today, closed at $360.53 and we got a high water mark of $360.67 back in July, so it's very easy for Microsoft to get up there. If you wanna buy a piece here and you wanna maybe if you think the market can come in, you can buy more maybe at like $338. Then you can buy more at $310, alright? That's how I would buy it if I didn't own Microsoft.
I would certainly buy some here because we get a year-end rally, you're gonna wish you owned some Microsoft. So you start with a piece right here.
Next up Apple, AAPL. Someone has taken a bite out of the Apple pie. I'm sorry, but it's not a Buy here.
The bloom is off the rose, so to speak. This Apple's got some worms in it as far as I'm concerned. So it's a NOT. It closed $181.22.
Now I know there are a lot of huge Apple fans out there. The stock has been this absolute stellar performer, but it's in a downtrend right now, okay? So when it kind of got up to its highs and then back in July toward the end of July, the stock rolled over. Now it's in a downtrend, okay?
Now, because of this recent rally last couple of days, it's popped above its downtrending channels, right? So it's just gotten a little bit above there. Now, it's gotta stay above there and it's gotta consolidate above there and that means it's gotta stay above $179, $180, close to $180, $182. It's very easy to fall back into that downtrending channel.
But I'm just not a fan of Apple in here because again, they've got problems, they got sourcing problems, the sales are slowing down. I don't think they have anything really cool, new in the product line is coming out. The refresh recycle, not working for them the way it has in the past. I just don't think that Apple has got the energy to get climb back up out of this downtrending channel and try and make new highs and then stay there.
It just, I think again, mm, there's a couple little worms in Apple. So sorry, but it's not. If you own Apple, if I own Apple and I'm out of my Apple some time ago, handsomely profitable, but I get out of stuff, even though the stuff like this that I wanna keep for years, and I do, doesn't mean when I think the market is turning that I'm not gonna get out because that for me, I don't mind timing the markets. I will buy back in lower if I'm right, I'll buy back in sometimes a lot lower.
So I ring the register, yes, it's long-term. So I have long-term capital gains and then I'll buy back in lower and ride it up again for another couple of years. And Apple, I think we wanna wait to go and buy back in. But if you wanna buy back in Apple, maybe like $166.
If it gets down to $166 though, people, I'd be kind of scared if it breaks through that. So Apple's, sorry to say it, NOT.
Next up, Amazon. I'm gonna say BUY.
Why? Because Amazon is Amazon. There's nobody else on the planet that does what Amazon does, other than Alibaba in China. But Amazon is Amazon, it's a monster.
We're talking here the close at $145.86. The 50-day is $130.27, the 200-day is $118, so it's trading well above that.
And as far as Amazon goes, look, October 25 was an ugly day for a lot of the tech stocks. Why? Because we saw the 10-year go up toward 5% and a lot of these stocks got hit, Amazon got hit too. So you know, stuff that comes out on earnings, sometimes there's a problem, but when the market, you know, the weight of the market impacts, not so great earnings report, you're gonna see stocks tumble.
We saw that with Google too, but I'll get to Google. But Amazon is a buy. So close at $142.72. Now it's not far off of its 52-week highs.
We're talking about $140, let's call it $146, all right? So we're almost there, so this rally continues. This gonna get there in a matter of heartbeat. And if we get a year-end rally into a Santa Claus rally and it's like la-di-da, Amazon's going higher.
So you definitely wanna buy Amazon 'cause it's a long-term buy. If you wanna buy a piece here, cool. If you wanna wait and buy a tranche a little lower, I'd recommend $132, put in a buy or to buy maybe another quarter at $132 and then maybe another quarter about, you know, maybe go down to the 200-day, you know, about $118 and you know, if it doesn't break there, then I'll buy my fourth piece right around there too and I just sit back and watch it for the next couple of years and watch it double 'cause I think it's gonna double in two years.
Again, the reason I think some of these big tech names are going to double is yes, they're going to face some regulatory challenges.
They're gonna face some FTC challenges, all that. They've done it in the past, they've faced it in the past and they've rolled over the FTC, they've rolled over everybody, including the ECB, the EU. It doesn't matter. They're gonna pay their fines and they're gonna do what they need to do.
In the case of Google, let's say that it doesn't matter to these companies. Long as they're generating cash and they're sitting on mountains of cash, these are the companies, people, that investors, institutional investors are going to go to if things get dicey. These are the companies that if things fall out of bed, that they're gonna jump back into bed with these companies because of their ability to generate the kind of cash that they have because they're disruptors because they are who they are. They're the magnificent seven, okay?
Though some of them bloom is off the rose. But Amazon, it's BUY here, people.
Next up... Tesla. Sorry, NOT.
No, Tesla is not a buy. Tesla is, to me, it's, dare I say, it's done. Tesla has had the run, it's been a great stock, it's been a vault, it's been a great stock to trade too. If you could time Tesla, you don't need any other stock.
You had to have a lot of capital to play Tesla to the upside and the downside, but Tesla has been a tremendous stock, whether you just bought it and kept it for years or whether you traded the ups and downs. But Tesla, I think the bloom is off this rose and maybe for good. When you think of Tesla, people, a lot of people will talk to me about SpaceX. Did he just read that SpaceX now, you know it's $9 billion in sales and it's going to be $24 billion.
Yeah, that's not Tesla. Elon Musk is Elon Musk, but Tesla is a car company. Yes, it's also a tech company. Yes, it is AI, yes, it's got all that stuff going for it, but at the end of the day, all this stuff works if they sell cars and sales are slowing down.
They brought prices down several times this year, people. Several times. Why they're bringing prices down? 'Cause the cars aren't selling.
Note to self, that's a problem. Alright? Yeah, the company's got a ton of cash, the company, the balance sheet looks great, the profit margin is better than any other car company out there. But it's at the end of the day, a car company.
Yes, it's a first mover, but that head start is over. Okay? So Tesla's still gonna sell cars, but they're not gonna sell 'em at the rate where they're gonna blow everybody else out of the water 'cause before there was no competition and now it's coming hard and fast and some of it's gonna be really exciting. So bloom is off the rose.
Tesla, NOT, people. Tesla closed today $222.18. The 50-day moving average $132.70. Oh, I beg you pardon, sorry that was Amazon.
That was a little bit of a tease. I looked at it and I said, wait a second. 50-day moving average is $244, it's trading at $222. So it's trading below its 50-day.
And guess what's really ugly about this? The 200-day is coming down to meet, excuse me, the 50-day is coming down to meet the 200-day and if it crosses over and under the 200-day moving average, that's called death cross. A lot of traders will look at that as an opportunity to sell, to short, to step all over Tesla.
So no, it's not a buy here. There's too much danger holding Tesla right here. Just because I love you guys, guess what? I'll tell you what I'm doing.
Tesla $200/$190 put spread. Check it out. Go out a few months. I've gone out more than a few months on it and a $10 spread you can buy for $3.
Go get some. Because Tesla back in April was $161. Again, it's $222 now. If you buy the $201.90 put spread and that thing closes below $190 and on or before your expiration, you're gonna make an awful lot of money on a spread like that, especially if you can buy a $10 spread for $3, people. All right?
There you go. Freebie, you're welcome.
Next up, Google. Yes, Google got hit. I know, you know, it was ugly. October 25, down 9%.
Ah! Frightening, frightening. But bounced right back up, people. Okay? So, you know, they miss a little bit on earnings.
There's some questions about the earnings at the same day, on the same day when the 10-year is making some awful ugly high in terms of yield and everything's getting hammered. So yeah, all boats sometimes go down. When the tide goes out, they're all gonna look a lot lower from the distance and that's what happened. The same thing with Google, but it's made a really nice move back.
It's going to fill the gap that's, so where is it today? Again, it's Tuesday afternoon post-close here, Alphabet Google, GOOG is the simple I'm using for those C shares, closed at $130.240. Now, the gap that is filling is gonna be 135, so it's got a little bit ways more to go fill the gap that it had when it got hammered on October 25 and fell 9%, which is a big drop for Google. Making a nice move back up.
You wanna own Google. The ad business is still strong, people. It's always going to be there for 'em. I don't care what regulators chase down as far as Google goes, I don't care what's gonna happen.
Some stuff may happen but it's not gonna impact Google that much. Mechanically, yes, there may be some changes, but as far as the ability to make money, they're sitting on $120 billion in cash. Wanna talk about cash is king? $120 billion in cash and $29 billion in debt, people.
That says it all. It's all you need to know. And it is a cash-generating machine. We're talking about $297 billion in revenue.
22.5% profit margin. You wanna own Google. It's a BUY here, it's a buy anywhere. So right here, 132, it can change, buy it.
Again, if you just want to take maybe a quarter of a piece or a third of a piece of what you eventually wanna allocate to Google, go do it right now, you're good here. You know what? If your market comes back down, you can maybe buy some more. I would say like yeah 125, 120 and then down to the 200-day, we will be talking about, well, $118, so you wanna buy it on the way down, you wanna average down on stock like Google because Google is gonna continue to go higher and higher.
Next up, Nvidia. Sorry, NOT. It's been a tremendous stock to hold. If you owned this over the last two years, you are swimming in cash and good for you.
But for those of you who thinking about buying Nvidia now, I think you're gonna be better off if you wait because Nvidia's going kind of sideways here. And is it consolidating? Maybe. If we have a run higher into year-end, Nvidia'd probably pop somewhat, but I don't know that it's got the energy to keep going because Nvidia's got some problems and they happen to be really China.
Why is the problem? Because the U.S. is trying to put pressure on China as far as AI and they are restricting Nvidia's sales of the chips that the Chinese want for their AI development. And the problem with that is that's a big chunk of Nvidia's earnings comes from sales to Chinese enterprises. The other problem is Nvidia doesn't manufacture their chips, they design them, but Taiwan semiconductor manufactures the bulk of Nvidia's chips.
Now, something happens with Taiwan semiconductor because it's in Taiwan. Yes, they have factories and fabrication plants elsewhere, but primarily most of their manufacturing is done in Taiwan. If something happens with mainland China and Taiwan, Nvidia's got a problem with its ability to get chips out of Taiwan, get them delivered to everyone who's buying them, so I'm not so sure Nvidia is a buy here. In fact, I think it's not a buy here.
You wanna wait on Nvidia. I think, you know, maybe see what Nvidia does and close at $459. Me, I don't own Nvidia. I wanna see what happens when it gets to $390.
I think it could test $390. I want to see if it breaks down from there. If it breaks down from there, people, then guess where the next stop is? $317.
That's where I'm gonna start buying some Nvidia. If we get down to $317, I'm gonna buy a chunk of Nvidia down there and if it goes lower, I'm gonna add to it because over time, it's going to be a great, great chip company to own. But the run has been spectacular and I don't see the energy for Nvidia to go a whole lot here, so be very careful if you own it. Again, you want to, you know, just some unsolicited advice.
For me, if I owned it and I had this tremendous run-up, I'd hate to see my profits disappear, I'd probably have something like a $425 stop on it and just be very happy if I got out there 'cause if you bought it two years ago, you're a big time.
Next up, I should say last but not least is Meta. And you know what? Meta's a BUY.
Why is Meta a buy? Because it's probably always gonna be a buy. Because when you think about Facebook and you think about Instagram and WhatsApp and you think about everything that they do and the audience that they reach, the average daily users, we're talking a billion and a half, something like that. The numbers are just unfathomable, just staggering, the reach of this company as far as the world and they're still out there, they're still growing.
So yeah, you can't ever fault Meta. It looks like it's gone sideways for a while because it has gone sideways for a while. But if you look at the chart, it's a pretty solid chart. I think it's consolidating here, so Meta is a buy.
I would buy Meta right here if you don't own Meta. If you owned it for a while, you've had a tremendous run-up, you're very happy with it, but I think if you don't own it, you can buy it here. Again, closed at $318 and change, we'll call it $318.28 actually.
So we've got, I'll just give you the 50-day is $306. So you know, if we come down a little bit, could easily test that 50-day very easily. The 200-day is $256. If we get a little bit of a pullback in the market, if we don't get this year-end rally, if we don't see some follow-through, if the 10-year auction tomorrow is a bust and yields go back up, then guess what?
The market's gonna sell up. There's gonna be profit taking you from the little bump that we've had the last five days, actually seven days now. So you gotta be leery of that. But that's why I'm saying don't buy, and all of these buys that I've given you today, don't buy a hundred percent position right now because the market's on a knife edge here.
It could go either way. We could see a year-end rally, we could see a roll over here. But I love buying stuff. I don't mind when stuff goes down.
If I've got capital and I wanna add to companies positions that I really like, like all the buys I've given you today, I don't mind averaging down, I like averaging down. So that means keep your capital powder dry and buy on the way down. Eventually you get to a point where things will bottom out, even if you don't buy the bottom with your last tranche. So what?
You're buying companies that are gonna double in the next couple of years. So these are solid stalwart companies and it's what you wanna be doing.
That's your BTNT for today. Be careful out there, it's still a little rough.
Cheers, everybody.
The post Buy This, Not That: The Magnificent or Mediocre Seven? appeared first on Total Wealth.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.