The megacap stocks have driven the gains in the broader market this year and now BofA is wondering who is left to buy them.
Ownership of the Magnificent 7 – Apple (AAPL), Amazon (AMZN), Alphabet (GOOG) (GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) – has reached “critical mass” with few funds left to buy, strategist Savita Subramanian wrote in a note.
The S&P (SP500) (NYSEARCA:SPY) (VOO) (IVV) is up nearly 15% year to date, but without the cap weighting of the 7 the equal-weight S&P (NYSEARCA:RSP) is still slightly lower for the year.
Looking at holdings of active long-only funds through the end of September, Microsoft is held by more than 90% of funds, with Apple and Amazon held by more than 70%, followed by Alphabet, Meta and Nvidia at more than 60%. Tesla has the most buying potential, with more than 40% of funds owning it.
Only Apple and Tesla are underweight in long-only funds relative to the S&P weighting.
At the same time, the short interest in the Magnificent 7 is at an all-time low, a little above 1% of market cap.