Last year around this time on CNBC’s Closing Bell, I shared “there’s more to life than the Mag 7” (and again on the Risk Reversal Pod in June). Back then, I felt we were, for the first time in over a decade, entering a stock picker’s market, where large cap index investing alone would leave opportunity on the table because: 

1. Higher interest rates would force management decisions to the forefront of a company’s future, creating greater dispersion.

2. Fiscal policy would come in with a force to support resource building.

3. AI was beginning to perform functions that could increase efficiencies for all.

4. Mag 7’s concentration in the S&P 500 index, equaling around 30% of the total, would dilute the benefit from relatively higher moves amongst the remaining 493.

It wasn’t that I thought the Mag 7 would perform poorly but that there would be other stocks providing outsized returns—so the Mag 7 should be treated individually, like any other stock.

Looking back, this came to fruition in that none of the Mag 7 are in the top 50 performers over the last year, with Alphabet just below that line in the 52nd spot.

For all the same reasons, we see this secular shift towards broader opportunities persisting this year (as we also pointed out in our 2026 outlook), but even more so. I believe the spread between the S&P 500 and specific opportunities will be even wider in 2026. The 10-year is still elevated at 4.2% and threats of other countries selling our bonds seems to pop up regularly. CapEx amongst the Mag7, and others, is expected to stay consistent past this year, which is still quite a large sum. We also know there will likely be more news on its way, in various sectors, related to resource security from the administration. 

Given the level of capex, several of these businesses are no longer so-called cash cows, but, instead, cash demanders. JPMorgan recently stated they expect debt issuance from some of them to be over $300B. This all means some companies are expected to flip, from having consistently positive free cash-flow yields, to low or even negative free cash flow yields, like Amazon and Tesla (and Oracle, who is not depicted in the graph). 

It also means the natural bid under names provided by large stock buybacks over the last decade or more may not be as veracious or consistent, since cash outflows will be more weighted towards investment. 

This is meaningful. Assumptions made by investors in the past about the production of these businesses, and the premiums they were bestowed, must be re-examined. They are no longer better by virtue. Their capex decisions is what it now comes down to.

And new cash cows may be taking their place.

So while we’ll continue to look at the Mag 7 names individually, we’re also focused on 3 R’s: receivers, resources and recoveries.  

• Receivers of the $700B-plus in cap ex spending by the hyperscalers, incentivized by the 100% expensing provision in the One Big Beautiful Bill Act (OBBA), and additional spending abroad.

  • Hardware, defense tech, equipment makers, or broad Japan

• Resources, be it a tangible item in high demand or material based on investments being made or who will benefit from how our economy is changing through technology.

  • Energy, consumer staples, or rare earth metals

• Recoveries of companies which sold off in the past and management are making decisions that we believe will lead to greater growth of fundamentals.

  • Certain retailers, select software (very selective), or China tech

In short, keeping a wider lens, and not letting past (but largely correct) biases towards sectors like tech create a blind spot on stories and shifts happening in other parts, should put investors in a better position. And importantly, since we also believe volatility will stay elevated, this diversification should be a benefit.