MAGS: Magnificent Seven Continue Early 2024 Magnificence

Only a few years ago, FAANG stocks were bullish beasts–and Facebook (now Meta) Apple, Amazon, Netflix and Google (now Alphabet) were all the rage.

Currently, the Roundhill Magnificent Seven ETF (MAGS) holds a portfolio of the leading technology and AI companies. MAGS owns four of the five FAANG stocks, excluding Netflix. The portfolio also includes NVIDIA, Microsoft and Tesla, as well as a substantial amount in Treasury Bills (about 44%).

MAGS has seen inflows in 2024 and the price has moved higher. Over the first weeks of 2024, market participants have embraced the large-cap, cutting-edge technology stocks. 

The combined value on Jan. 26 at $12.69 trillion represented 25% of the total market cap of 3,646 of the largest U.S. companies. Apple and Microsoft have values on either side of $3 trillion market caps (a shade below and above respectively); Alphabet, Amazon and NVIDIA have surpassed $1.5 trillion. Meta has topped the magical $1 trillion level, with Tesla at more than $585 billion. Tesla’s market may be the lowest in MAG-7 but its value ranks more that twice that of the second-leading automaker, Toyota.

MAGS Outpaces QQQ in 2024

With a few days to go before the end of January, the tech-heavy Invesco QQQ Trust (QQQ) has moved 3.5% higher–from $409.52 on Dec. 29, 2023, to $423.73 on Jan. 26. 

Meanwhile, MAGS has slightly outperformed QQQ, rising 4.0% from $33.45 at the end of 2023 to $34.78 per share on Jan 26.

Based on its Jan. 26 price, MAGS has $69 million in assets under management. Launched on April 11, 2023, MAGS trades an average of about 145,000 shares daily and charges a 0.29% management fee. A significant market sentiment indicator is the flow of funds into or out of a stock or ETF. Fund flows reflect the wisdom of the crowd.

The etf.com Fund Flows Tool shows that $34.46 million has flowed into MAGS in 2024 through Jan. 25, a significant injection considering its $69 million market cap. Rising prices and increased participation technically validate the upward trend, which reflects the bullish sentiment.

AI at Center Stage 

Artificial intelligence is one of the leading investment stories in 2024. The tech sector sits on the cutting edge of the machine learning that simulates human intelligence processes. While AI offers significant growth for investors, a considerable risk of speed bumps exists along the way. The tech bubble at the turn of the 20th Century offers a lesson in extreme caution. The risk of significant corrections will rise with the technology share prices.

Follow the Money

The trend is always your best friend in markets as it reflects the overall crowd’s wisdom. The price of any stock or asset is always the correct price as it reflects the level where buyers and sellers meet in a transparent environment, the marketplace. 

MAGS’s path of least resistance is higher and the fund flows tell us the smart money is buying. Meanwhile any risk position–whether long or short or a trade or investment–should have a plan for risk-reward dynamics. When riding a bullish trend, enhancing profit horizons by increasing upside targets is appropriate. However, since any position is long or short at the current price (not the execution one), moving stops higher to protect profits, and capital is a prudent and optimal approach. 

Follow the smart money, which is bullish on MAGS in late January 2024. But as in a game of musical chairs, make sure you know what to do if the music stops and the selling begins.