The 'Mag 7 Bench': Josh Brown Picks The Next Magnificent 7 Stocks

As the mega-cap tech rally stalls, investors are starting to think about what stocks could make up the next “Magnificent Seven.” Ritholtz Wealth Management‘s Josh Brown used a stock screener and came up with seven names he calls the “Mag 7 Bench.”

What To Know: “We came up with a few metrics that we wanted to break this down by, and I kind of like the list that we came up with,” Brown said on Tuesday’s episode of "The Compound & Friends" podcast.

The metrics include market cap, relative strength, price-to-earnings ratios and revenue growth.

All the companies on the list have a market cap below $350 billion, 14-day relative strength of 45 to 65, forward price-to-earnings ratios of 85 or less, and five-year annualized growth rates of 25% or greater.

“Look at the five-year annualized growth, this was the thing that knocked everybody else out by the way. When we asked for 25% plus five-year annualized growth, we ended up with nine stocks,” Brown said.

Here’s a look at the “Mag 7 Bench” that Brown and company came up with:

• Advanced Micro Devices Inc AMD

• Uber Technologies Inc UBER

• ServiceNow Inc NOW

• Fiserv Inc FI

• CrowdStrike Holdings Inc CRWD

• Palantir Technologies Inc PLTR

• Atlassian Corp TEAM

See Also: ‘Seven Samurai’ Stocks – Goldman Sachs Picks Leading Japanese Equities — How Do They Compare To The Magnificent Seven?

Why It Matters: Brown noted that the list is not perfect, but it gives people something to think about.

“Here’s what I would do with this list,” Brown said.

“I would look at the business that these companies are in and I would just ask like, could this be something that would justify a trillion-dollar market cap someday in the future?”

He used Uber as an example. He believes transporting people and delivering things from one point to the next could warrant a market cap of $1 trillion or more one day.

“I’m just saying that TAM could justify a Mag Seven-sized market cap. That’s the exercise that I think people should do if they’re trying to find a stock that at least has the potential,” Brown said.

If you ran the same stock screener five years ago, some of the names in the current Magnificent Seven would have been overlooked. Even if you ran the same screener, but lowered the five-year annualized growth rate requirement to 20%, both Apple and Microsoft would have been left out, Brown said.

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