Buy ‘magnificent seven’ on corrections, says NYU’s Damodaran

The “Magnificent Seven” stocks are a buy during corrections as most of them will keep generating money, according to a New York University professor known for his expertise on valuations.

“As a value investor, I have never seen cash machines as lucrative as these companies are,” Aswath Damodaran, a finance professor at NYU’s Stern School of Business, said in a Bloomberg Television interview. “And I don’t see the cash machine slowing down.”

The stocks — Tesla Inc., Meta Platforms Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Apple Inc. and Nvidia Corp. — are some of the biggest worldwide, have dominated the tech and artificial-intelligence boom, and been responsible for an outsized amount of US equity-index gain for years. A Bloomberg gauge of the seven has surged 60% so far this year after doubling in 2023.

There will be corrections and “I’d suggest that when that happens you find a way to add at least one, maybe two or three of these companies, because these are so much part of what drives the economy and the market,” he added.

The cohort’s gains have been helped recently by electric-vehicle maker Tesla, which was down for much of the year. It’s rallied as investors bet that Donald Trump’s return to the White House will be a positive force for the company run by Elon Musk, who helped finance Trump’s campaign and is an adviser to the president-elect.

Damodaran said that the seven megacaps including chip giant Nvidia are “insanely profitable” and he owns all of them.