We are at the end of January 2024, and time is just speeding along. Looking at the Financial Heat map you will notice that January is normally a month of moderate returns. Tomorrow we will know the final tally for the rate of return for January.   If you follow the Financial heat map you will notice that the probability of the markets having a positive return for the month is slim. That being said, pick your entry points wisely, and let’s take a  look at some key factors to the Magnificent 7 Stocks.

These 7 stocks have such an impact on the world, our country, and the S&P 500 yet, for the most part,  we do see them daily. The Magnificent 7 are known to have a 28% weight on the S&P 500 and in the last quart of 2023, their impact was over 50%.

What do we know about these companies? What are their defining direction and how have they changed?

MSFT{Microsoft Corporation, last trade $403.27 -5.32 (-1.30%)} the owner of XBOX, Bing, Activision Blizzard, Linkedin, Skype, Nokia, aQuantive, and Hololens. The once-monoculture company is creating an enormous footprint in virtual gaming and artificial Intelligence. Combining some of the resources of these companies could create synergies that will take the world into greater high-tech societies. 

META{Meta Platforms, Inc., $393.55 -6.51 (-1.63%)}is one of the companies that no longer see themselves as a one-dimensional revenue stream. Facebook is no longer the sole revenue source generator. Facebook is now a company within the corporate structure of META. With companies such as Whatsapp, and Facebook Messenger, META could easily put an end to cell phone paid services.  Over 90% of the countries, Kenya, Malaysia, South Africa, Nigeria, Argentina, and others use WhatsApp. 69% of people with internet and wifi use WhatsApp. Even though Instagram is still a big revenue source for the company since its purchase in 2012, META is banking on its ownership of Oculus’, another subsidiary, virtual headset, and projects with WhatsApp to bring an even greater chat experience.

TSLA{Tesla, Inc.,  $190.12 -1.47 (-0.77%)} made a smart strategic move in 2016 by reorganizing the company acquiring Solar City and making it a division of Tesla known as Tesla Energy. In addition, TSLA owns German Car developer and manufacturer  Grohmann Engineering and Grohman parts division. Many people still view TSLA as an auto company but in fact, it is a data-driven tech company. Every Tesla automobile is linked to Tesla’s satellite company Starlink capturing data on driving habits, and building a detailed road map of every lane and driveway in the world. The data will then be processed to develop driverless cars. The strategic use of Solar City or Teslas Enery along with another subsidiary, Maxwell Technologies, is integrating resources to generate and store energy more efficiently. 

GOOGL{Alphabet Inc., $141.77 -9.69 (-6.40%)} is no longer just a search engine company. The reason behind the name Alphabet Inc. is that they own every letter on the internet. It consists of YouTube, Chrome, Android, Fitbit, Nest, and a host of other companies. Linking your Fitbit and Nest together is already a thing! GOOGL has long been working on driverless car technology through its subsidiary Waymo which puts them in direct competition with TSLA and UBER.

AAPL{Apple Inc., $185.93 -2.11 (-1.12%)} is the biggest company in the world with its ownership of over 125 different companies. The Cupertino, Ca. company that holds its headquarters at Applepark, has yet to make its biggest acquisition. We know how the iPhone has taken this company into realms of dominance. Remaking the music industry with Apple Music, and the acquisition of Beats Music, the company continues to make moves in the broader entertainment industry. Do we see another acquisition of a larger entertainment company, like Disney? 

AMZN{Amazon.com, Inc., $156.32 -2.68 (-1.69%)} is a hard company to determine the path which this massive company is headed. All we know is that when they enter a certain market they tend to destroy the competition with their approach of pursuit of industry dominance as a cheetah would a sickly gazelle. The main question that should be applied to the company is when will they get rid of the “.com” from their corporate name. Part of their list of subsidiaries includes MGM, the entertainment company, Audible, Alexa, Ring, Whole Foods, Amazon Robotics, and Zappos, an internet clothing retailer. Their company Twitch is an interactive video streaming service that is in the YouTube space but is a host to video and virtual gamers. Another subsidiary-owned company Zoox is an autonomous vehicle company.

NVDA{NVIDIA Corporation, $615.24 -12.49 (-1.99%)} is a chip maker that ties many of these companies together in the service that they provide; with chip making that requires more and more speed, Nvidia is the company that performs at a high demand.  Even though their subsidiaries aren’t as known as the others of the Magnificent 7, they are still highly effective. Companies like Bright Computing, Cumulus Network, and Mellanox Technologies help the other companies by providing accelerated computational functions in handheld devices tablets, and supercomputers. Cloud computing is a vital expense to many of these companies like, Starlink satellites, Amazon Web Services, and YouTube’s video quality, speed, and storage, are all using Nvidia chips. Even Apple, who has had bad relations with Nvidia is using their services on a project with Disney subsidiary Pixar, Adobe, and Autodesk. Steve Jobs purchased the company from George Lucas in 1986 and called it,  Pixar, which was sold to Disney in 2006 making him, then the largest Disney shareholder.

The value of these Magnificent 7 Stocks relies heavily on how they extract the intellectual capital from their subsidiaries. Even though this tech boom started 40 years ago, it is still very seldom that many of these companies have strayed from their dynamic goals. Some new products have taken them in an alternate course but they are still true to their core philosophy. For instance is Apple a phone maker or are they a developer of a computer that is now a handheld device? Has Alphapbert moved from a search engine or are they still using data to determine how we look to acquire information? Amazon Web Service is such a big company that it could be spun off into an even greater company. The key defining factor of all of these stocks is that they are dominant in technology and technology remains a big growth.

We’re coming up on one year since regional banks showed signs of weakness. In March of 2023, there were

2 casualties to insolvency, Silicon Valley Bank(SVB) and Signature Bank(SBNY);  then in May of 2023, First Republic Bank(FRCB), followed by Heartland Tri-state Bank(HLAN) in July of 2023 fell to high-interest rates.

In March the Fed responded with the opening of The Bank Term Funding Program. This program was established in December of 2002.  It was never funded until March of 2023 and by the end of the month, banks had borrowed funds from this program to the sum of $62.645 billion. This indicated that many banks suffered from the strains of inflationary interest rate hikes.

What led to the demise of these banks was the simple fact that they had such a high ratio of investments to deposits that were beyond their regulatory limits.

Many banks were able to escape this peril by getting access to these loans and the first round of loan payments are due in March of 2024. This leads to the prediction that the Fed may cut interest rates in March to help lenders who have borrowed from the program obtain a bit of ease of payment. At present the funds that have been borrowed from the program are $174 billion. 

5 regional stocks that appear to have weathered the interest rate shock and are displaying good returns are Zions Bancorporation, National Association (ZION), Valley National Bancorp (VLY), ServisFirst Bancshares, Inc. (SFBS), Western Alliance Bancorporation (WAL), Pacific Premier Bancorp, Inc. (PPBI).

ZION stock VLYstock  SFBS stock WAL stock  PPBI stock bank and banks

Zions Bancorporation, National Association (ZION) whose stock has gone from $29.69 on 10/23/23 to $45.67 on 12/14/23 a 54% return, and now trading at $43.93 showed a more prudent approach to managing their assets and deposits. In December of 2022, they had $89.5 billion in total assets, $71.7 billion in deposits; $55.1 billion in loans & $23.51 billion in total investments. October 2023 Quarterly report shows total assets of $87.3 billion, $75.4 billion in deposits, $56.2 billion in loans, and $20.74 in total investments.

Valley National Bancorp (VLY)  stock has gone from $7.75 on 10/23/23 to $11.03 on 12/14/23  a 42% return, and now trading at $10.58 appears to position itself as a traditional bank lending institution. In December of 2022, they had $56.9 billion in total assets, $47.6  billion in deposits; $46.9  billion in loans & $5.2 billion in total investments. October 2023 Quarterly report showed total assets of $61.1 billion, $49.8 billion in deposits, $50.9 billion in loans, and $6.05 in total investments.

ServisFirst Bancshares, Inc. (SFBS) stock price inflated from $46.79 on 10/23/23 to $65.11 on 12/14/23  a 39% return, and now trading at $62.80 also follows the old school model banking. In December of 2022, they had $14.6 billion in total assets, $11.55  billion in deposits; $11.6  billion in loans, and $1.6 billion in total investments. October 2023 Quarterly report showed total assets of $16 billion, $13.1 billion in deposits, $11.6 billion in loans, and $1.87 in total investments.

Western Alliance Bancorporation (WAL) stock soared from $41.41 on 10/23/23 to $66.30 on 12/14/23  a 60% return, and now trading at $64.53 continues to show their strong conservative credit culture serving diverse organizations. In December of 2022, they had $67.7 billion in total assets, $55.6  billion in deposits; $52.2  billion in loans, and $8.5 billion in total investments. October 2023 Quarterly report showed total assets of $70.9 billion, $54.3 billion in deposits, $48.1 billion in loans, and $10.4 in total investments.

Pacific Premier Bancorp, Inc. (PPBI) stock also had an impressive run from $20.02 on 10/23/23 to $29.55 on 12/14/23  a 48% return, and now trading at $27.80,  markets themselves as a disciplined institution, focusing on prudent and proactive risk, liquidity, and capital management. In December of 2022, they had $21.7 billion in total assets, $17.74 billion in deposits; $14.8 billion in loans, and $4.1 billion in total investments. October 2023 Quarterly report showed total assets of $20.3 billion, $16 billion in deposits, $13.67 billion in loans, and $3.83 in total investments.

With the spring not too far in focus, interest rate cuts may show a positive position for those banks who are following traditional banking strategies and may have the brightest outcome. 

Look for many postings like these and other simple trading ideas in the near future.