2 “Magnificent 7” Stocks with Solid Moats You Can Buy Now

Stock prices have soared over the past year, and much of that rise is thanks to the “Magnificent Seven.” But I’m not talking about the western that hit the screens in 1960 or the more recent version that hit theaters in 2016. The seven companies I’m talking about are a group of industry-leading companies, all developing cutting-edge technologies and all with names you’ll recognize. alphabet (GOOG -1.22%) (google -0.95%), Amazon, apologize (AAPL -0.60%), meta platform, microsoft, nvidiaand tesla.

Except for Tesla, all of these stocks have risen by double or triple digits over the past year, helping the index rise in this new bull market. From its history of growth to its investments in cutting-edge technologies like artificial intelligence (AI), there are many reasons to love the Magnificent Seven.

These players also stand out for their moat or competitive advantage. Moats are especially important because if they are strong enough, they can help a company maintain its leadership over the long term and can lead to sustained revenue growth. Two Magnificent Seven stocks in particular offer solid moats. This is one reason why this stock should be on your buy list.

Image source: Getty Images.

alphabet

Alphabet is the company that developed the Google search engine, a tool we use every day. When most of us need to find out about something, our first reflex is to ‘Google’ that information. Advertisers know this, which is why they flock to Alphabet to advertise their products or services on Google. These advertising expenses make up the largest portion of the company’s revenue (75% of sales in the most recent quarter), and this is likely to continue thanks to Alphabet’s excellent moat.

The company’s competitive advantage in the search space is that most of us use Google Search as part of our daily lives. And this has helped the platform consistently maintain over 90% share of the search market. This dominance has also strengthened Alphabet’s competitive advantage.

Alphabet’s moat could further strengthen as it invests in AI, a technology that could further improve search. The company launched Gemini, its most powerful AI tool ever, late last year, and recently launched its next-generation model, Gemini Ultra.

Alphabet is testing Gemini in search, and the results have been very positive, making the process faster and generative AI improving search results in a number of ways. For example, Google can address more complex questions and provide you with a broader range of links that correspond to your search term.

All of this should keep people coming back to Google for their search needs. This means advertisers must continue to use Google, too. Alphabet has also developed AI tools to help advertisers create campaigns. CEO Sundar Pichai said the company had shown “a lot of interest” here.

Alphabet stock is currently trading at 20 times projected earnings. This is an absolute steal for Magnificent Seven stock, which has a fantastic moat.

apologize

Apple may be a word you use every day in your home. I’m not referring to the fruit, but to the companies that make many major consumer products, from iPhones to Macs. Owners of Apple products tend to stick with their products regardless of price increases, product or competing products. As a result, the tech giant has enormous brand power.

This brand strength is Apple’s moat, and it has remained strong over the long term so far. In the smartphone market, Apple maintained its leading position and rose to first place last year with the iPhone. According to research firm IDC, Samsung Electronics ranked first in the world with a 20% market share in the smartphone market for the first time in history.

The total installed base of Apple devices recently hit a new record of 2.2 billion units worldwide. Not only did iPhone’s active user base hit an all-time high, Apple also announced that the number of users upgrading to iPhones hit an all-time high during the quarter. This shows that users keep coming back to Apple.

But that doesn’t mean Apple’s growth is limited to its current customers. The company also continues to attract new users for its products. For example, in a recent quarter, about half of Mac and iPad buyers were first-time buyers of those specific products, and two-thirds of Apple Watch customers were first-time buyers. Apple’s brand strength helps it retain long-time customers and attract new ones.

These strengths have helped Apple grow triple-digit revenues and improve returns on invested capital over the past decade. This means that Apple’s investment was a wise one and the company benefited from it.

AAPL net income (annualized) data from YCharts.

Apple stock currently trades at 27 times future earnings estimates. This is a very reasonable price for a company that has achieved a lot of growth over the long term, and promises even more growth in the future thanks to its solid moat.