By 
Proactive Investors – The Magnificent 7 will be hogging US financial news headlines over the coming weeks.
Not to be confused with the Yul Byrnner-starring 60s Western classic, the term refers to the seven premier Big Tech stocks on the Nasdaq 100, namely Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Meta Platforms, Microsoft (NASDAQ:MSFT), NVIDIA (NASDAQ:NVDA) and Tesla.
It’s a high-stakes earnings season for this set of megacaps, with AI-powered earnings growth front and centre of the market’s attention.
Closer to home, the FTSE 100 is also making headlines after hitting three fresh all-time highs in the past three days.
Much has been said about the struggles facing the London stock market, from depressed company valuations to rampant delistings and private equity takeovers.
But with UK blue chips surging to new records, clearly things aren’t as bad as they could be.
With that in mind, what are the top blue-chip stock picks that constitute Britain’s own Magnificent 7?
Let’s take a look at the star footsie members driving the index to new records.
Valuation ≠ magnificence
On pure valuation terms, Shell (LON:RDSa), AstraZeneca (NASDAQ:AZN), HSBC (LON:HSBA), Unilever (LON:ULVR), Rio Tinto (LON:RIO) and GSK (LON:GSK) are Britain’s largest listed companies.
That’s all well and good, but valuation doth not equal magnificence.
If we look at the best-performing FTSE 100 members year to date, we come up with Rolls-Royce (LON:RR), NatWest (LON:NWG), Beazley (LON:BEZG), Antofagasta (LON:ANTO), Barclays (LON:BARC), BAE and Intermediate Capital Group (LON:ICGIN).
Again, not every firm in this list inspires magnificence and some are at the very bottom of the FTSE 100 rung.
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So what metrics, you may be asking, should be considered when making this list?
A different beast
Sector-wise, the FTSE 100 is an entirely different beast from the Nasdaq.
Comprising some 40% of the entire Nasdaq 100, the US Magnificent 7 are the companies driving innovation in technology and artificial intelligence; indeed, the Nasdaq is a proxy for global tech.
Footsie is considerably more diversified, with financial services, healthcare, energy and manufacturing commanding comparable weightings. Not to mention the influence of Big Tobacco by way of Imperial Brands (LON:IMB) and BAT (how anti-woke, the footsie is).
One of the advantages UK stocks have over their US counterparts is their strong income-generating potential; tech stocks aren’t known for the dividends after all.
While the Nasdaq does trump the footsie in the buybacks space, recent Goldman Sachs (NYSE:GS) data suggests this gap is closing.
On this basis alone, we could suggest a UK Magnificent 7 comprising the top income generators.
This would include the likes of Compass Group (LON:CPG), Burberry, Shell, BP (LON:BP), The London Stock Exchange Group (LON:LSEG), Diageo (LON:DGE), Imperial Brands, Rio Tinto, Berkeley Group, British American Tobacco (LON:BATS), Coca-Cola (NYSE:KO) HBC and AstraZeneca.
Some likely contenders in that mix, no doubt, but you’ll be hard-pressed to call some of these names the top of their leagues in terms of general performance (hello, Burberry).
And the winners are
What does our shortlist look like right now?
AntofagastaAstraZenecaBarclaysBAEBeazleyBerkeley GroupBPBritish American TobaccoBurberryCoca-Cola HBCCompass GroupDiageoGSKHSBCImperial BrandsIntermediate Capital GroupNatWestRio TintoRolls-RoyceShellThe London Stock Exchange GroupUnilever
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Some of these are no-brainers.
AstraZeneca is a world-leading biotech multinational with a solid dividend policy. It makes the list. The London Stock Exchange Group has emerged as one of the great global data big caps following the Refinitiv acquisition and its buyback policy is exceptional. You can’t really avoid Shell and while we’re on the anti-woke front, BAT is one of the best income stocks out there. Rolls-Royce is a paragon of British engineering and deserves a place.
Compass Group, though less of a household name, is the largest foodservice group in Europe and there’s a good case to be made for its inclusion. However, for the sake of a wildcard entry, this reporter is going with Primark-owner Associated British Foods (LON:ABF).
Though quite far down the footsie list at number 28 by market cap, AB Foods’ profits are soaring and its dividend policy is making waves.
That leaves just one slot for the taking. For the sake of diversity befitting the FTSE 100’s diverse sectoral mix, let’s exclude likely contenders BP, GSK and Imperial Brands and BAE.
Unilever’s impending ice cream spin-off disqualifies it, likewise does HSBC’s Asia focus.
London being the global financial services hub that it is, a premier lender should take the final spot. With Barclays tipped to return £11 billion in capital by 2026, that’s what we’re going for.
So, without further ado, the Magnificent 7 (Square (NYSE:SQ) Mile 7) of the FTSE 100, when taking into account income, share price strength sectoral excellence, are:
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AB FoodsAstraZenecaBarclaysBritish American TobaccoLondon Stock Exchange GroupRolls-RoyceShell
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