Follow the leader. It's a game most of us played as kids and many still play as adults. In some cases, following the leader might even be a smart investing strategy.
Ken Griffin certainly ranks as one of the top leaders in the investing world. His Citadel hedge fund has achieved a level of success that few can match. Griffin's net worth stands at $35.4 billion, a reflection of his company's impressive track record.
His Citadel portfolio includes a large number of stocks. Notably, Griffin owns every single one of the "Magnificent Seven" stocks. Should you own them, too?
How much Griffin has invested in the Magnificent Seven
We don't know for sure exactly how much Griffin has invested in the Magnificent Seven right now. However, Citadel's 13F regulatory filing last month revealed how much money the hedge fund had in each of the stocks as of the end of 2023:
| Stock | Percentage of Portfolio | Shares Owned | Value Owned |
|---|---|---|---|
| Nvidia (NVDA +1.00%) | 1.81% | 3.63 million | $1.8 billion |
| Microsoft (MSFT 0.34%) | 1.61% | 4.24 million | $1.59 billion |
| Amazon (AMZN +5.43%) | 0.95% | 6.23 million | $945.9 million |
| Meta Platforms (META +2.63%) | 0.87% | 2.46 million | $869 million |
| Apple (AAPL +0.63%) | 0.4% | 2.08 million | $401 million |
| Alphabet (GOOG +0.53%) (GOOGL +0.37%) | 0.25% | 1.79 million | $250.9 million |
| Tesla (TSLA +0.63%) | 0.09% | 350.4 thousand | $87.1 million |
Data sources: 13F filings, HedgeFollow.com. All data as of 12/31/23.
Griffin's bets on these seven stocks extend beyond direct ownership of shares. Citadel also owned call and put options on Nvidia, Microsoft, Amazon, Meta, Apple, Alphabet, and Tesla at the end of last year.
The hedge fund upped its stake in Nvidia by nearly 77% in the fourth quarter of 2023. That bet has paid off nicely, with Nvida's share price skyrocketing in 2024.
NASDAQ: NVDA
Key Data Points
Griffin also significantly increased Citadel's positions in Amazon, Meta, and Tesla in Q4. Two of those moves have made money, with Amazon and Meta shares jumping close to 15% and 40%, respectively, year to date. However, buying additional shares of Tesla has been a losing proposition for Griffin so far this year.
NASDAQ: TSLA
Key Data Points
Citadel reduced its stakes in Microsoft, Apple, and Alphabet in Q4. Two of those three decisions have proven to be good ones in 2024, with Apple and Alphabet shares falling. Griffin would have been better off holding onto his Microsoft shares, though, as the tech stock tacked on additional gains since the end of 2023.
NASDAQ: MSFT
Key Data Points
The top pros and cons of these stocks
Each of the Magnificent Seven stocks comes with pros and cons -- like any other stock. The tremendous potential for artificial intelligence (AI) especially stands out as a major plus for all seven of them.
The demand for Nvidia's graphics processing units (GPUs) to power AI apps continues to soar and likely will for the foreseeable future. Microsoft, Amazon, and Alphabet should enjoy strong tailwinds as organizations shift IT spending to the cloud to harness the power of AI.
Meta's open-source AI approach could reap huge benefits. And Apple CEO Tim Cook recently confirmed that his company is "investing significantly" in generative AI with a major announcement likely coming later in 2024.
Several of these Magnificent Seven stocks also share a common denominator that's on the negative side: valuation. NYU finance professor Aswath Damodaran, known by the nickname "the Dean of Valuation," thinks that Nvidia and Microsoft are trading the most above their fair valuations. However, the share prices of Alphabet, Apple, and Tesla are currently below the fair values determined by Damodaran.
The relative cheapness of Alphabet, Apple, and Tesla isn't accidental, though. Alphabet had an embarrassing public relations incident with its Google Gemini creating inaccurate images of historical figures. Apple's growth has slowed considerably, and Tesla faces intense price competition in China.
Should you own these Magnificent Seven stocks, too?
Following the leader is only smart when the leader is going in the same direction you want to go. For income investors, that isn't the case with Griffin and his Citadel hedge fund -- at least not with the Magnificent Seven stocks. Sure, Apple, Microsoft, and Nvidia pay dividends. However, their dividend yields are low.
Griffin doesn't focus on valuation. While value investors might find some stocks in Citadel's portfolio that are attractive, the group won't include even the cheapest of the Magnificent Seven stocks.
Growth investors, on the other hand, should love several of the Magnificent Seven. Keep in mind, though, that exceptionally high valuations could still dampen some of these stocks' growth prospects.
The truth is that there's no single right answer to the question of whether or not you should own all of the Magnificent Seven stocks as Griffin does. However, if you're looking for long-term growth, several of these stocks should provide plenty of it.
