The so-called "Magnificent Seven" stocks didn't get that moniker for no reason. It refers to a group of tech companies that have historically delivered market-crushing returns and could continue to do so. No doubt, every single one of them is worth some consideration, and in my view, most have a place in most investors' portfolios.
However, two of these corporations, Apple (AAPL -0.35%) and Meta Platforms (META 0.43%), are my favorites, although they are very close. Let's consider why these two tech juggernauts are excellent forever stocks.
1. Apple
Apple's market cap is inching closer to $3 trillion, and the company's biggest growth driver in the past 15 years, namely the iPhone, has lost traction. To be clear, the iPhone continues to generate tens of billions in sales every year for Apple and remains its largest category in terms of revenue. But it simply doesn't drive the same kind of top-line growth that it once did.
Many investors are skeptical of Apple's future, but the company can still deliver market-beating returns. For one, Apple has a history of developing newer, better technological devices, often adding tweaks to existing gadgets. They won't all be as successful as the iPhone, but investors can expect more gems from the tech giant along those lines.
Second, Apple is increasingly relying on its services segment. The opportunities here are nearly limitless: Thanks to an installed base of more than 2 billion devices, Apple can offer a range of services, from video and audio streaming to healthcare and fintech. Nothing stops the company from adding new options, and that's precisely what it has historically done.
Apple's services business also generates much higher margins than the rest of its operations, so as it becomes a larger part of its revenue, it will work wonders for its bottom line. Third, Apple has a strong competitive advantage that stems from its brand name -- one of the most valuable in the world -- and switching costs. Those who join Apple's ecosystem of interconnected devices and services find it difficult to leave for fear of having to deal with such troublesome things as having to migrate valuable data.
Apple consistently ranks among the top companies in terms of customer loyalty for a reason. Last but not least, Apple pays a dividend. In the past 10 years, it has raised its payouts by 120%. Reinvesting dividends will help boost long-term returns for those who choose to do so. Apple may no longer offer the kinds of returns it did in the 2010s, but that's an incredibly high bar for any company.
Still, the tech giant should remain a leader in its field for a long time and continue delivering above-average returns.
2. Meta Platforms
Meta Platforms, the parent company of Facebook, has also had its detractors. Its advertising revenue dropped for some time due to economic pressure, and the company saw its profits squeezed by heavy investment in its Reality Labs segment. However, Meta Platforms turned the corner last year. The company decreased expenses while benefiting from a rebound in the advertising market.
Revenue increased, profits jumped, and the stock performed exceptionally well in 2023. Here's what that tells us about Meta Platforms' prospects. While it is susceptible to the whims of the economy -- as are many successful corporations -- the company's business is strong enough to handle them. One of Meta Platforms' most important assets is that it boasts 3.96 billion monthly active users across its websites and apps.
That's about half of the human population that visits at least one of Meta's websites at least once a month and about 3.14 billion who do so daily. Furthermore, the company benefits from a competitive advantage as well, mainly from the network effect. Want to catch up and share pictures with friends and family? Going to a website that already has a large number of users, such as Instagram, is a great option. And the more people who join the platform, the more attractive it becomes.
Meta has also been ramping up new monetization initiatives. The company's Reels (short-form videos across Facebook and Instagram designed to compete with TikTok) is soaring in popularity, while paid messaging on WhatsApp is also delivering excellent results. The company is also making a push in artificial intelligence.
Additionally, Meta Platforms hasn't given up on its metaverse idea, although that likely won't yield any significant return on investment soon. Still, it is another potential long-term opportunity for the company. E-commerce is another obvious growth opportunity for Meta Platforms, given its large ecosystem. Meta should soon rejoin the trillion-dollar club, but that won't mark the end of the company's growth journey.
That story still has plenty of chapters left. Investors can buy the stock, sit back, and enjoy the ride.
