The focus on high-growth stocks often has investors pondering on who the next Magnificent 7 replacements will be. The “Magnificent 7” has set an extremely high bar that few companies have reached.
However, with the technological landscape advancing rapidly things can quickly change its course. Identifying these transformative companies will certainly not be easy, but can yield substantial returns. These companies often boast robust financial performance, groundbreaking technologies, and strong moats, making them primed contenders for long termgrowth.
Now, here are the top 3 stocks that could be the next Magnificent 7 replacements in the next decade!
Berkshire Hathaway (BRK.B)
Berkshire Hathaway (NYSE:BRK.B), led by legendary investor Warren Buffett, is a conglomerate with diverse holdings across various sectors including insurance, railroads, energy, technology and consumer goods. While not a traditional growth stock, Berkshire’s strong financials coupled with Buffett’s astute guidance make it a compelling option for investors.
Berkshire Hathaway’s primary goal is to acquire high quality businesses with strong market positioning and cash flows from operations. This strategy has worked well over time, positioning the company to surpass the trillion-dollar market capitalization status. Additionally, Berkshire’s substantial cash reserve allows the company to remain nimble, and scoop up companies that may be deeply undervalued.
In its 2023 annual report, the company reported having more than $167 billion in cash and cash equivalents. Its reserves have continued to grow since the pandemic, with Buffett remaining more cautious on the broader economy. However, this liquidity will prove handy when opportunities come about to acquire businesses for pennies on the dollar. Berkshire Hathaway is well positioned to continue its upward trajectory, making it a notable candidate for the next Magnificent 7 replacements in the next decade.
Netflix (NFLX)
Netflix (NASDAQ:NFLX) presents a unique buying opportunity for investors looking for the next Magnificent 7 replacements. The company’s restructuring efforts in 2023 are paying off, set to bolster operating income and free cash flow in 2024.
Netflix’s commitment to original content production has set it apart from its competitors. By investing billions in original movies, series, and documentaries, it has created a vast library that continues to attract and retain customers globally. Moreover, its crackdown on password sharing in combination with its new-ad plan membership is paying dividends.
While this move is risky, it has paid off by boosting revenue growth, margins, and free cash flow substantially. In FY23, Netflix revenue increased 6% YOY to $33.7 billion. Earnings per share (EPS) swelled to a record $12.03 per share, with operating margin up 300 basis points to 21%. Nearly all financial metrics are trending in the right direction, and management issued strong guidance for FY24.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) remains a frontrunner for the best Magnificent 7 replacements to buy in 2024. Its focus on high growth markets, such as 5G, artificial intelligence, and Internet of Things, position it for outsized returns through 2030.
Broadcom stock has outperformed the market over the last 5 years, rising 381% as compared to the S&P 500’s 83%. This is attributed to their wide array of semiconductor and networking equipment for hyperscale data center environments. It has benefited tremendously from the demand for generative AI services, and their customer silicon chips are well suited to meet customer demands.
In the 2023 fiscal year, Broadcom’s revenue increased 8% YOY to $35.8 billion. Net earning skyrocketed 25% YOY to $14.08 billion, while achieving a record adjusted EBITDA of 65%. Now with the VMWare acquisition under its belt, it expects consolidated revenue of more than $50 billion in FY24. Investors can be rest assured of the long term tailwinds in AI, and Broadcom is uniquely positioned to capitalize on this trend.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
