Citibank Super 7 aims Big Profits. Mag 7 watchout!
Time to Move On?
Move over Magnificent 7, there are new kids on the block.
And they are cheaper than you, so said Citibank in a note to clients.
Citi analysts revealed its European stocks (7 in total), telling investors they:
Offer attractive margins similar to the "Magnificent 7".
Trade at more attractive valuations than the US's tech giants. (see below)
On Thu, 29 Feb 2024, Citibank coined a new term “Super 7” on a list of 7 identified stocks they feel are price tag “superior” to the current Magnificent 7.
Magnificent 7.
Apple Inc (AAPL).
Amazon (AMZN).
Google (GOOG).
Meta Platform (META).
Microsoft (MSFT).
Nvidia (NVDA).
Tesla (TSLA).
Super 7.
$ASML Holding NV(ASML)$. World's leading manufacturer of chip-making equipment.
$Ferrari NV(RACE)$. Luxury sports car manufacturer.
$LVMH-Moet Hennessy Louis Vuitton(LVMUY)$. World’s leading luxury lifestyle brands in all 5 major sectors of the luxury market: (a) Wines & Spirits, (b) Fashion & Leather Goods, (c) Perfumes & Cosmetics, (d) Watches & Jewelry and (e) Selective Retailing.
$Novo-Nordisk A/S(NVO)$. Global healthcare company with worldwide presence.
$Compagnie Financiere Richemont AG(CFRHF)$. Competitor to LVMH, in 2 major sectors - (a) Watches & Jewelry and (b) Fashion.
SAP. German MNC with enterprise software to manage (a) business operations and (b) customer relations.
Schneider Electric. French MNC specializing in energy management and automation company. It develops related technologies and solutions for electricity distribution.
Shortlist criteria.
High-profit margins.
Solid earnings-per-share growth.
Competitive advantages.
Successful mirroring of US's tech behemoths.
Examples.
Based on rolling 12 months performance, Novo Nordisk bottomed on 12 Mar 2023 at $486.60 per share.
Since then, it never looked back as stock price bubbled up throughout 2023. (see above)
As of 01 Mar 2024, it closed Friday’s trading at $850.90 per share.
Past 12 months performance has been a +68.63% gain.
Similar story for Dutch semiconductor equipment manufacturer.
Based on past 12 months performances, it corrected itself on 02 Oct 2023 at $582.18 per share.
With the Artificial Intelligence (AI) race at full throttle, it is still peaking as we head into March 2024.
Last Friday’s closing price was $990.94 per share.
This is a +55.47% gain so far.
Despite the gains, Citi notes that the Super 7 have “overall” appreciated 70% less than their US counterparts since early 2023.
This means there exists a significant upside potential in 2024 & beyond.
Analysts' Optimism
Besides Novo Nordisk and ASML, analysts’ consensus suggests a positive outlook for the Super Seven, with upside targets ranging from 2.20% to 4.82%, especially for companies like LVMH and Richemont.
This optimism is based off belief that these companies are well-positioned to capitalize on the current market dynamics, continuing their trajectory of outperformance.
Future Ahead - Bright.
Citi's analysis underscores the potential for the Super Seven to thrive in the ongoing "narrow" market conditions.
In addition, the bank advises against selling stocks based on narrow market leadership, hinting at the broader upside potential for cyclical stocks and market indexes if economic growth expands.
This perspective not only highlights the immediate opportunities within Europe's leading stocks.
At the same time, it also points to a promising medium-term outlook for the broader market.
My viewpoints: (mine & mine only)
Personally, I do not doubt the quality of these blue-chip Euro stocks.
However, to put them side by side and direct-compare seems a bit over-stretched.
How do you compare apples and oranges?
I do not think the Super 7 are necessarily better or worse than the Magnificent 7.
They are different and appeal to different types of investors.
Super 7 may offer more value and dividends.
Magnificent 7 may offer more growth, innovation and momentum.
In terms of stock performance, Super 7 may catch up with the Magnificent 7 in terms of performance.
However, they may also continue to lag if US market favors technology over other sectors.
Super 7 may be cheaper than the Magnificent 7, but they may also be cheaper for a reason.
The article has been interesting, but not convincing; considering the on-going Russia-Ukraine war is on continental Europe.
US, Europe and China’s economies are not exactly booming.
Luxury brands’ past healthy sales have been attributed to Chinese “incessant” demand.
Will sales continue to boom against a weak Chinese economy backdrop?
Even Apple has to lower its iPhones’ prices in China due to weak demand - need I say more?
To me, luxury goods & lifestyles are not life’s necessities, can continue to enjoy what I already have and only consider when economic conditions pick up.
Personally, a deeper analysis of shortlisted company’s (i) fundamentals, (ii) prospects and (iii) risks are required.
Perhaps, it is time to diversify my portfolio across (a) different regions, (b) sectors and (c) styles, rather than focus on a specific group of stocks?
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Do you think the Super 7 will be at vibrant as the Magnificent 7 further down the road?
Do you think you will examine selected Super 7 stocks - up close & personal?
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