The "Magnificent Seven" originally made the headlines as a Western back in 1960, but in recent times, it's entered the investing world. Bank of America analyst Michael Hartnett first used the term last year to refer to a group of stocks that are industry leading, each known for its strengths in some form of technology. These players, among the most heavily weighted in the S&P 500, have helped the benchmark soar into bull territory over the past year or so and could continue to drive gains thanks to their growth prospects.
These top stocks are: Alphabet, Apple, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla.
But there's one obvious element missing from this group: a healthcare company that's actually outperformed five of the Magnificent Seven stocks over the past year. And this player also now represents a bigger position in the S&P 500 than one of the Magnificent Seven stocks. Is this company on track to become the next Magnificent Seven company? Let's find out.
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A path to the Magnificent Seven?
First, it's important to note that the Magnificent Seven isn't some sort of group or club that periodically welcomes new members. So, for Lilly to usher in the era of the "Magnificent Eight" or for a new stock to replace a current player in the Magnificent Seven, there aren't any official procedures to follow. The investment community as a whole would have to begin referring to this group as the "Magnificent Eight" – or clearly and broadly refer to one stock no longer making the cut in the Magnificent Seven and another taking over.
There's no guarantee any of that that will happen. But if it does, my prediction is healthcare giant Eli Lilly (LLY 1.19%) will enter this elite group of stocks. Lilly, gaining about 130% over the past year, has outperformed all of the Magnificent Seven except Meta and Nvidia -- they climbed more than 140% and 250%, respectively.
And Lilly has grown to become the eighth most heavily weighted stock in the S&P 500, surpassing Tesla, which has fallen to the No. 10 spot.
Why would Lilly make a great addition to the Magnificent Seven? Because the company's growth may beat even that of the group's best performer, Nvidia. Lilly is on track to deliver 50% growth annually over the coming five years -- that's higher than Nvidia's 35% annual growth estimate over the same period.
A $100 billion market
And driving Lilly's growth is a program with significant potential, the company's weight loss drug portfolio. The global weight loss drug market may reach $100 billion by 2030, growing 16 times from today's level, according to Goldman Sachs Research. And this forecast isn't surprising considering the trend Lilly and rival drugmaker Novo Nordisk have seen for their weight loss drugs: demand has surpassed supply, prompting both companies to ramp up manufacturing infrastructure.
Lilly makes two drugs -- Mounjaro and Zepbound -- that doctors have been prescribing for weight loss. The former officially was approved for type 2 diabetes, while the latter was approved specifically for weight management -- both are the same molecule, tirzepatide. It works by acting on two hormone pathways involved in digestion and has produced compelling results in clinical trials and in the real world. Lilly also is developing a third candidate, retatrutide, which may even outperform these current products because it acts on an additional hormone.
Lilly doesn't depend on its weight loss drug platform alone for earnings though. This big pharma player has a broad portfolio of products as well as a deep pipeline. But the weight loss program, which already is bringing in billions of dollars in revenue, could represent an enormous growth driver over the coming years -- making this healthcare player a growth stock that could easily claim a spot among the Magnificent Seven.
What this means for you
What does this mean for you as an investor? A potential spot in this group of stocks could buoy Lilly stock for a day or two, but inclusion in the Magnificent Seven or any other list isn't what makes Lilly a buy. Its growth potential does. Considering the demand for weight loss drugs today and most likely down the road too and Lilly's work on new candidates, prospects look bright. On top of this, Lilly's portfolio of other products also is driving earnings -- and the pipeline may ensure this growth will last.
Lilly today trades for 61x forward earnings estimates, which looks expensive for a pharma stock -- but this company is looking more like a growth stock, making this valuation look reasonable.
So, whether my prediction is right or not, Eli Lilly is a top growth stock to buy today and hold onto for the long term.
