One of America’s most respected investors says the ‘Magnificent Seven’ isn’t overvalued — the rest of the market is

Howard Marks, the co-founder of Oaktree Capital Management, makes a case a case for value in mega-cap tech stocks. - AFP via Getty Images

Despite a handful of tech stocks contributing to most of the S&P 500’s gain this year, esteemed investor Howard Marks doesn’t think the “Magnificent Seven” stocks look overvalued. Instead, he views the rest of the stock market as potentially problematic.

Marks is the co-chairman of Oaktree Capital Management, an investment firm with a history of generating returns through deals in distressed credit and equities. He has written a handful of books about investing and gained the respect of investing legend Warren Buffett.

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In a recent memo, Marks shared his current thoughts on how investors should think about value, and how that relates to the market right now. Value is tied to an asset’s fundamentals, he argued, saying it matters over the long run, regardless of what the market is doing at a given moment.

Finding value in today’s market

Marks pointed to a memo he wrote about the dot-com bubble in January 2000, and in January 2025 he published another note about current valuations, titled “On Bubble Watch.”

Here’s how he views the dangers in markets when things become too optimistic or pessimistic: “When the majority of investors are optimistic, they cause price to rise and potentially exceed value. And when the pessimists reign, they cause price to decline and potentially fall short of value.”

Marks notes that the S&P 500 SPX returned 58% over the course of 2023 and 2024, and just over half of those gains came from the “Magnificent Seven” stocks, which are Apple AAPL, Microsoft MSFT, Alphabet GOOG, Amazon AMZN, Meta Platforms META, Nvidia NVDA and Tesla TSLA.

While that was historically unusual, Marks said he didn’t think those seven stocks were overvalued, using price-to-earnings as a metric to measure value.

“Because of these companies’ greatness, their stocks are highly valued, and there’s a popular perception that their elevated valuations are responsible for the S&P 500’s unusually high average p/e ratio. The fact is their p/e ratios average out to roughly 33. This is certainly an above-average figure, but I don’t find it unreasonable when viewed against what I believe to be the companies’ exceptional products, significant market shares, high incremental profit margins and strong competitive moats,” he said.

La historia continúa

However, when looking at the rest of the S&P 500 companies, Marks saw some valuations that weren’t justified.

“Rather, I think it’s the average p/e ratio of 22 on the 493 non-Magnificent companies in the index — well above the mid-teens average historical p/e for the S&P 500 — that renders the index’s overall valuation so high and possibly worrisome,” he said.

You can read more, here, on his views on fundamentals, sentiment, prices, valuations and more. But here’s a final nugget: “The existence of overvaluation can never be proved, and there’s no reason to think the conditions discussed above imply there’ll be a correction anytime soon. But, taken together, they tell me the stock market has moved from ‘elevated’ to ‘worrisome.’”

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