What are MAGMA stocks? Examining the ‘new FAANGS’

Summary – What are MAGMA stocks?

MAGMA stocks is a term used to describe five of the current largest and least volatile technology companies listed on the NASDAQ – Microsoft, Apple, Google, Meta and Amazon. The term is relatively new. It began to be used on social forums and in some financial media during 2022, as the multi-year bull market in the so-called FAANG (Facebook, Apple, Amazon, Netflix, Google) stocks collapsed.

So, the term MAGMA stocks has effectively replaced FAANG stocks, with Netflix losing its status as a top five tech giant after its share price collapsed and Microsoft moving into the acronym, along with a bit of an order reshuffle for maximum lingusitic effect.

MAGMA stock codes

  • Microsoft – NASDAQ: MSFT
  • Apple – NASDAQ: AAPL
  • Alphabet (Google) – NASDAQ: GOOGL
  • Meta – NASDAQ: META
  • Amazon – NASDAQ: AMZN

Expert take on MAGMA stocks in 2023

For many years leading up to the 2022 bear market, FAANGs were some of the best performing stocks globally. However, MAGMA stocks face a much tougher environment, with tighter monetary policy, higher rates and inflation causing a major re-rating in stock markets.

One prominent analyst with a view on MAGMA stocks is Keith McCullough from Hedgeye TV.

“People on Wall Street are being forced to go to MAGMA stocks because those are big cap stocks with low beta, low short interest, low debt… The style-factor performance that people get crowded into,” he says.

But McCullough warns investors to not follow the crowd into MAGMA stocks in 2023. He likens them to the last remaining part of the Titanic still above water in the moments before it completely sinks.

“What happens to that last part of the boat? It all goes down at once. That’s going to be earnings season, get ready for it.

“If you think Microsoft’s earnings were bad at GDP +2, wait until they’re -2. There’s a lot going on out there, understand the flow of the Titanic as opposed to the fundamentals they think they see. What they want to believe is, ‘I’m on a great company with a great balance sheet’, well that was the whole argument 15 months ago as well… You don’t just buy it because it has a good balance sheet.”

But other investors are far more bullish on MAGMA stocks and see the sell-off as an opportunity to “buy the dip” in the tech giants.