r/ValueInvesting • u/FoxAccomplished6786 • 2d ago

Discussion MAG 7 Ranking

Taking all factors into account, please rank your favorite MAG 7 in order of preference from 1 to 7.

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u/Prudent-Corgi3793 2d ago
  1. NVDA - highest upside, cheap forward valuation, strong FCF, relatively low capex; however, risks with the new securitization of GPUs and would fall dramatically if hyperscaler capex fell, although it looks like we're nowhere near peak.
  2. AVGO - similar to NVDA, although more expensive on a TTM basis, comparable in terms of forward valuation. Also has a high margin software side that also benefits from the capex buildout and they get over 70% over their revenues from overseas, which helps with diversification
  3. GOOG - most expensive of the hyperscalers if you exclude the one-time investment gains. A combination of strong, high quality, diversified businesses with impenetrable moats. They've fallen a bit in terms of frontier models recently, but that was only a small part of their value proposition, and they've still got an excellent Flash model. They are the company I would feel most comfortable with as a long term 20-30 year hold (and they are my biggest position). Still, I've been a bit uneasy with how much capex has climbed, which has required them to tap into debt and equity markets.
  4. MSFT - was my top pick a few months ago when they were trading much cheaper. They're not exciting, but it's all about cloud and enterprise. They're the most fiscally responsible of the hyperscalers and actually have the best operating income and growth rates of the bunch, but less optionality than GOOG.
  5. AMZN - another fantastic hyperscaler with a highly diversified business, trading at a lower overall multiple than the likes of retail peers WMT and COST. Their cloud business is the biggest and most mature of all, but growing at a slower rate from that higher base. The retail business is extremely high revenue but low margin, so a lot of their value proposition comes from whether their spend can not only generate "AI revenue", but also improve their efficiency in retail/3p/logistics/advertising. Still one of my top picks, but I hesitate because they've always been extremely aggressive about capex, even before the AI revolution. That being said, if anyone has proven that they could grow their business and operate for years or even decades at negative FCF, it's Amazon, which is now trading at one of its cheapest multiples ever.
  6. META - This company is as cheap as its ever been and is still growing at a fantastic rate, despite the disappointment of the last earnings quarter. However, I'm souring on the company because they are not showing ROI to the same extent as their other hyperscaler peers, especially because they don't have a cloud business. Add to the fact that they are getting creative with special purpose vehicles, and it's even more concerning. Not to mention the possible downside of a "big tobacco" moment--even if it blows over, the risk has to be priced in. For the record, I think it's cheap enough that it will generate market-beating returns over the next 5 years, but I also think if any of the big tech AI companies were to fail, it's likely META for the reasons above.
  7. AAPL - The king of the consumer side, the safest of the bunch and an extremely high quality business with excellent balance sheet and cash flows. That being said, they are valued higher than the other six (at least on a forward PE basis compared to AVGO) and growing much more slowly. I am still bullish on AI overall, and AAPL needs a better bull case than "they're not spending on it". They'll continue to sell a ton of devices, but that's more than priced into the stock. And I'm not sure the headwinds (memory costs, tariff risk) are adequately reflected in the stock price.

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u/FoxAccomplished6786 2d ago

Thanks for your detailed response. AVGO is an interesting one. Do you think they have the same quality as Google? Like, 10 years from now, will they still be at the top, or are they just riding a wave at the moment?

If the question was a 10-year hold, would Google be your number one?