Investors losing sleep over the dramatic loss of market capitalization for the stocks of the Magnificent Seven group of companies this week might consider another option: buying their bonds.
Even after the group lost a combined $233 billion in market cap on Tuesday, bond spreads and prices have remained fairly steady and are still close to where they were at the beginning of the year.
See: ‘Magnificent Seven’ shed $233 billion in market cap, dragging down the stock market
What’s more, the group’s two- to three-year bonds are yielding between 4.25% and 4.75% and are highly rated by Moody’s and S&P.
One caveat: Only six members of the group have outstanding bonds. Tesla Inc.
TSLA,
issued convertible bonds in the past, but those have been converted to equity.
The other members are Nvidia Corp.
NVDA,
Microsoft Corp.
MSFT,
Apple Inc.
AAPL,
Google parent Alphabet Inc.
GOOGL,
GOOG,
Amazon.com Inc.
AMZN,
and Facebook parent Meta Platforms Inc.
META,
The following charts from data solutions provider BondCliQ Media Services show that spreads for the group have widened by only a few basis points in the year to date. By comparison, Apple Inc.’s stock is down 12%, Tesla Inc.’s stock is down 29% and Google parent Alphabet’s stock is down 6%.
Select bonds of the Magnificent Seven: YTD spread performance
BondCliQ Media Services
Prices have also held relatively steady in the period.
Historical price performance of Magnificent Seven debt.
BondCliQ Media Services
The bonds have seen net buying in the period, led by Apple, which has the most outstanding bonds of the group at about $107.5 billion.
Bonds of the Magnificent Seven — YTD net client flow.
BondCliQ Media Services
To be sure, not all of the group’s stocks are down in the year to date. Nvidia Corp., for example, has gained 77%, and was the only member of the group to gain on Tuesday during the broader market carnage.
Nvidia’s stock gains have come after its latest earnings report suggested that the frenzied interest in its graphics-processing units was poised to continue. GPUs have proven essential to companies building out artificial-intelligence applications and have sent Nvidia into the stratosphere. The stock recently passed the $2 trillion market cap threshold.
See also: After Nvidia’s latest blowout, here are 20 AI stocks expected to rise as much as 44%
Tuesday’s retreat marked the third-largest daily loss in market cap for the Magnificent Seven group this year, with the largest one-day rout being the $375 billion reversal logged on Jan. 31, according to Dow Jones Market Data.
The group has been a key support for the overall stock-market rally for months and any weakness is having a disproportionate effect on the broader market.
