No companies that comprise the so-called Magnificent Seven have had as dismal a start to the year as Tesla, leading analysts to question the electric vehicle maker's place in the group.
Last year, these seven tech companies – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – posted huge gains. But this year has been a different story, most notably for Tesla, as it has been left far behind.
After Friday's trading, Tesla ended the week down 6.7 per cent. This year to date, Tesla shares have fallen by nearly 34 per cent.
Tesla's market cap has dropped by roughly 58 per cent since peaking at $1.23 trillion in 2021, when it closed at $409.97 a share in November that year.
As of Friday, it had a market cap of $519.9 billion, making it the 13th most valuable US company and the 15th most valuable company globally.
Art Hogan, chief market strategist at B Riley Wealth, said he does not consider Tesla to be part of the Magnificent Seven.
“No, I don't think so,” he said when asked by The National.
“That's been happening since arguably October of last year, and I think that [the] Mag Seven … counted for a great deal of the gains in the S&P 500 over the course of 2023. That has not been the case in 2024,” Mr Hogan said.
Its hard start to the year was punctuated on Wednesday when Wells Fargo analyst Colin Langan predicted zero growth in sales volume in 2024. He also made a more grim prediction in forecasting that volumes will drop in 2025.
Tesla is a “growth company with no growth”, he wrote.
But Tesla's problems date to last year, where it faced a range of issues including safety recalls, federal investigations and slowing growth.
Investors have also questioned the leadership of Tesla co-founder and chief executive Elon Musk over his other ventures such as X and Neuralink.
In an April 2023 letter to Mr Musk, a group of shareholders noted that as he focused on those other products, “Tesla is increasingly losing market share in the high-performance EV market”.
In its fourth-quarter earnings report published in January, Tesla said growth would be much slower this year as the company moves towards producing its next vehicle and is “between two major growth waves”.
More concerning for the Texas-based company, though, is the emergence of Chinese competition. Chinese car maker BYD surpassed Tesla for the first time in the three final months of last year, selling 526,000 vehicles compared to Tesla's 485,000.
“That's likely what is really been the new headwind for Tesla over the course of the last six months or so,” Mr Hogan said.
The Fab Four, or meet The Replacements?
If Tesla is out of the tech-heavy Magnificent Seven, the question turns to which company would replace it, or if the group should shrink.
Amazon, Meta, Microsoft and Nvidia have made the biggest contributions to S&P 500 returns this year.
“There's a real growing movement … to something like the Fab Four, where you'd actually knock out three of the underperformers … but the first exit would certainly be Tesla,” Mr Hogan said.
But if the Magnificent Seven were to stick for some time, it could perhaps expand its membership to companies that are not tech-based.
Drug maker Eli Lilly is making the most noise. The company, best known for its drug to treat diabetes, has seen its market rise to $718 billion. Ozempic maker Novo Nordisk is seen as its closest competitor in the pharmaceutical sector.
Warren Buffett's Berkshire Hathaway, credit card companies Visa and MasterCard, or a Taiwanese semiconductor could all be contenders to take Tesla's place, according to Mr Hogan.
“If you look at the Magnificent Seven was put together in this sort of 2023 time frame … these companies seem to be unstoppable and they've kind of left out some pretty obvious candidates that have done equally well and continue to do well this year,” he said.
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Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Should late investors consider cryptocurrencies?
Wealth managers recommend late investors to have a balanced portfolio that typically includes traditional assets such as cash, government and corporate bonds, equities, commodities and commercial property.
They do not usually recommend investing in Bitcoin or other cryptocurrencies due to the risk and volatility associated with them.
“It has produced eye-watering returns for some, whereas others have lost substantially as this has all depended purely on timing and when the buy-in was. If someone still has about 20 to 25 years until retirement, there isn’t any need to take such risks,” Rupert Connor of Abacus Financial Consultant says.
He adds that if a person is interested in owning a business or growing a property portfolio to increase their retirement income, this can be encouraged provided they keep in mind the overall risk profile of these assets.
The bio
Studied up to grade 12 in Vatanappally, a village in India’s southern Thrissur district
Was a middle distance state athletics champion in school
Enjoys driving to Fujairah and Ras Al Khaimah with family
His dream is to continue working as a social worker and help people
Has seven diaries in which he has jotted down notes about his work and money he earned
Keeps the diaries in his car to remember his journey in the Emirates
Company%20profile
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Heavily-sugared soft drinks slip through the tax net
Some popular drinks with high levels of sugar and caffeine have slipped through the fizz drink tax loophole, as they are not carbonated or classed as an energy drink.
Arizona Iced Tea with lemon is one of those beverages, with one 240 millilitre serving offering up 23 grams of sugar - about six teaspoons.
A 680ml can of Arizona Iced Tea costs just Dh6.
Most sports drinks sold in supermarkets were found to contain, on average, five teaspoons of sugar in a 500ml bottle.
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
