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Anyone with money in the U.S. stock market has heard, endlessly, about the Magnificent Seven. Those seven tech companies—Microsoft, Apple, Nvidia, Amazon, Meta, Tesla, and Alphabet (Google’s parent company)—punched way above their weight last year, accounting for more than 60% of the S&P’s big return in 2023, even though their combined value at the start of the year was only 20% of the index.
But rather than concentrating on the big winners, it’s also instructive to look at what I call the Sorry Seven—last year’s biggest losers, measured by how much the dollar value of their shares declined. My numbers come from Wilshire Indexes, whose FT Wilshire 5000 Total Market Index measures the dollar value of the 3,427 (at last count) stocks that make up the U.S. market.
The Sorry Seven essentially fall into two categories: pharmaceuticals and energy. (NextEra, the only one of the Seven that isn’t a household name, owns Florida Power & Light and has green energy projects throughout the country.)
Tech companies being ascendant in the market last year and pharma and energy companies being descendant are an example of why unless you’re really good at picking stocks, you might want to invest mostly in broad-based mutual funds.
For example, the company at the top of our list, Pfizer, shows how yesterday’s big winner can be today’s big loser.
Pfizer had a great 2022, buoyed by revenue from COVID vaccines, combined with optimism about the anti-obesity drugs that it was working on. Anti-obesity drugs, of course, are a relatively new, hot, high-profit pharma field.
But last year, with COVID-19 cases dropping, Pfizer’s COVID vaccine revenue plunged. And Pfizer discontinued work on one of its anti-obesity drugs and had regulatory problems with a second proposed anti-obesity drug. So its stock took a beating.
It was one of those years in which a lot of things went wrong for Pfizer—the opposite of 2022, when lots of things went right.
It was a similar situation for Moderna, which soared in 2022 because of its COVID vaccine sales, then sank last year when demand for COVID shots declined sharply.
Johnson & Johnson’s market cap shrank by $87 billion rather than the $57.1 billion that we show. We adjusted J&J’s market cap reduction because $29.9 billion of it stems from 192 million shares that it retired when it exchanged shares in its consumer health-products spinoff, Kenvue, to J&J shareholders (which, for full disclosure, includes me).
J&J was hurt by the falloff in COVID vaccine demand—and by having to pay billions of dollars in damages to people who sued, claiming they contracted cancer from the talcum powder that J&J used to use in some of its products.
Bristol-Myers Squibb didn’t have a COVID vaccine business to lose, but its market cap got clobbered anyway. That’s because sales of the company’s Revlimid cancer drug were hurt more than predicted by competition from generics, and because of the prospects of generic competition for some of its other key projects. (A BMS spokesperson whom I asked to discuss the stock’s downturn told me that BMS is “excited by where our business is headed, and we look forward to continuing to deliver for patients.”)
On the energy front, Exxon Mobil and Chevron, the two biggest U.S. energy companies, were hurt by low prices of oil and natural gas. NextEra’s green energy operations were hurt by low energy prices too.
One of the most striking things about the Leading Losers’ losses is how small their total market value decline—$413 billion—was, compared with the gains posted by the Magnificent Seven, which have a total of eight stocks because Alphabet has two publicly traded share classes.
Market gains of Microsoft ($985.2 billion) and Apple ($922 billion) were both more than double the combined losses of the Sorry Seven. Six of the Magnificent Seven companies’ individual gains outweighed the Leading Losers’ total losses.
The Magnificent Seven’s total gains were $4.77 trillion, more than half the $9.22 trillion total return (price gains plus reinvested dividends) posted by the Wilshire 5000. In other words, these eight stocks outgained the total of the Wilshire’s 3,419 other stocks. Pretty astounding.
Given how many people own S&P 500 index funds, I asked Howard Silverblatt, senior index analyst for S&P Dow Jones Indices, how much the Magnificent Seven and Sorry Seven each influenced the S&P last year.
He told me that the Magnificent Seven accounted for 62.2% of the S&P 500’s 28.3% total return. The Sorry Seven’s combined decline, he said, reduced the S&P return by a mere 1.3%.
Will the Sorry Seven rebound this year? Will some or all the high-multiple Magnificent Seven lose their magnificence? That’s still unclear. But as 2023 shows, one year can make a big difference.
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