The hottest name on investors’ lips this year has been the ‘Magnificent Seven’ (MAG7). This refers to a group of US large-cap stocks that have driven most of the gains in major US stock market indices recently.
It includes Nvidia, as well as more traditional growth stocks such as Apple and Tesla. Yet closer to home, there are some great FTSE 100 stocks that have actually beaten some MAG7 performers over the past year.
Cementing performance
For reference, the two FTSE 100 stocks haven’t beaten the performance of all the MAG7. But they have beaten Apple (up 20%), Tesla (down 11%) and Microsoft (up 34%).
The first one in focus is Taylor Wimpey (LSE:TW). The UK homebuilder has jumped 51% over the past year, as the property market continues to recover.
There are several reasons why I think this growth stock could keep going over the next year. It’s been buoyed in the short term by Labour’s general election win. The party has big plans to make housing more affordable, but also to get more homes built. Any fiscal help provided to Taylor Wimpey to fuel this construction will be a big benefit.
Further, the stock’s been moving higher already, based on speculation that interest rates are going to start to fall soon. This will make mortgage rates cheaper, allowing more people to buy the homes that Taylor Wimpey builds. I feel we will see the first cut in September. Confirmation of this should help to keep the share price rally in full flow.
As a risk, the business will still take time to recover from a couple of difficult years. At the AGM in April, the firm detailed that the total order book value is only at £2.09bn, down from £2.38bn a year earlier.
The turnaround giant
Another stock on fire right now is Barclays (LSE:BARC). The top tier bank has enjoyed a 49% increase in the share price over the past year.
Pretty much all of these gains have come in 2024, most of it following the key announcement back in February about the reorganisation of the business. The CEO commented that he wanted a “simpler, better, more balanced bank”. As a result, it has embarked on a large efficiency drive, cutting costs but also focusing efforts on the profitable areas of the bank.
This has been taken well by shareholders since then. Obviously, only time will tell if this has really made Barclays a better business. But the early signs indicate it’s on the way.
Looking forward, the stock isn’t even close to being overvalued, so I see limited risk of the share price dropping suddenly. The price-to-earnings ratio is 8.04, still below my benchmark figure of 10 that I use.
Lower interest rates will hamper future profits, and this is a risk. However, I think some of this will be offset by higher customer card spending and mortgage sales that result from the imminent rate cuts.
The performance of both stocks shows there’s a world outside the MAG7. I already own Barclays shares but I’m considering adding Taylor Wimpey.
