I saw Spaghetti Western for the first time last year, and I still kick myself for not watching it sooner.handful of dollars is a masterpiece.
I remembered the title of this movie because of the handful of money that many investors made from the so-called “Magnificent Seven.” Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Meta Platform (META), Microsoft (MSFT), NVIDIA Corp. (NVDA) and Tesla (TSLA)-last year.
Of course, these tech companies took a big hit in 2023, surging an average of 75% and accounting for most of the market’s gains.
The reason is very clear. It is an artificial intelligence that rapidly entered the public consciousness with the release of his ChatGPT in November 2022.
To be fair, Several There’s a lot of hype around this technology, but you might be surprised to hear me say this. not very many. I say that because the gains in tech stocks are still small given estimates of AI’s potential value to the economy.
For example, research firm McKinsey recently released a report claiming that generative AI will contribute between $2.6 trillion and $4.1 trillion to America’s GDP in the future, although the timeline behind that number is a bit vague ( And the range is quite wide).
But there’s another reason to believe AI stocks will rise in 2023 it’s not Despite the tech sector’s surge, the S&P 500 remains below its all-time high (although the benchmark index surpassed its all-time high last week).
And the benchmark index is only barely above its previous peak in late December to early January 2022.
On the other hand, the tech sector’s 75% growth last year is certainly impressive. But zoom out to late 2021 and The Magnificent Seven looks a little less impressive.
NVDA Leads 7 Great Achievements
Y chart
On average, these stocks are up 8.8% annually, which is modest compared to tech stocks as a whole. If you exclude NVIDIA, NVIDIA is actually down on average due to Tesla’s big decline.
And considering the 2023 return of 11.6% for the other 493 S&P 500 companies (which, by the way, haven’t recovered from the declines that followed their all-time highs), this market ( (including technology)it’s not It was overbought.
The strange reaction of many people upon hearing this news may be to pick up on the most popular one. SPDR S&P 500 ETF Trust (SPY). But we closed-end fund (CEF) investors know better.
After all, why own a fund like SPY and its 1.4% dividend when you can get a much higher CEF?8 times morein fact?
Simply put, we don’t mean to, and we don’t. Especially if you have CEF options like: Gabelli Equity Trust (GAB) around it. GAB is run by renowned value investor Mario Gabelli and holds major stocks in the S&P 500. Mastercard (MA), Deere (DE) and Berkshire Hathaway (BRK.A).
This means that if you actually own an index fund like SPY, you can “swap” it into GAB and own many of the same stocks. The 11.7% yield provides cash dividends.
SPY holders, on the other hand, take little solace from its 1.4% dividend and must rely primarily on price appreciation for profits.
That’s why we like CEF. CEFs help prices rise because they pay us from dividends, NAV gains, and closing price discounts to net asset value (NAV). Buyers of ETFs, on the other hand, only care about price appreciation in order to make a profit.
On that note, GAB is currently trading at a 2% discount, which doesn’t seem like much until you consider that the fund has traded at an average premium of 7.9% over the past five years .
Michael Foster is the Principal Research Analyst for: contrarian outlook. For even bigger income ideas, click here to check out our latest report.Undying Income: 5 Great Value Funds with Stable 10.9% Dividends.”
Disclosure: None
