Megacap? More Like Mega-CRAP! Dear Reader,
It’s the start of a new year. You have some fresh cash to invest, and you want to invest in something for the long haul.
How about dumping it into the so-called “Magnificent 7,” or “Mag 7,” for short?
What could go wrong investing in Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Amazon.com (AMZN) , Alphabet (GOOGL), Meta Platforms (META) and Tesla (TSLA)?
After all, these are the biggest, baddest and most profitable companies in the history of capitalism. They’ve already generated trillions of dollars in returns for investors over the past five years ... to the point where, collectively, they make up more than 33% of the entire S&P 500 index.
Well, you could do that. But 26 years of history suggests that’s a really bad idea.
That’s right … buying the largest stocks is a surefire way to generate lousy, market-lagging returns over time. And if my hunch is correct, I expect that investors in the Mag 7 are going to learn that lesson the hard way this year.
About that…
Mark your calendar for tomorrow — Wednesday, January 7, at 1 p.m. As part of my livestream event, “Move Your Money by Friday at 9:30 a.m.,” I’ll be covering exactly why I believe the Magnificent seven won’t be so magnificent in 2026 … and, even more importantly, where I want you to move your money by Friday morning, assuming you’re serious about setting yourself up to beat the market this year.
And the best part is that you only need 12 trading days per year to execute the action plan I’ll be sharing with you.
First though, let’s get back to those megacaps… | 
Tiny rare-earth miners are exploding: 200%, 300%, even 500% gains in just months. But while everyone piles into the same names, I’ve uncovered the next wave of this $3 trillion resource story…a breakthrough that could make today’s miners obsolete. I’m expecting the big announcement any day now.
Full Story Here. | Megacaps Are a Recipe for Disappointment I crunched the numbers, running a study that built a portfolio of the top 2% of stocks by market cap – essentially the “megacaps” – and set the model to rebalance quarterly.
This may surprise you … The model portfolio returned a measly 3.95% per year. That’s less than half the return of the S&P 500 and more in line with the returns of a stodgy old bond portfolio. And it wasn’t a short period of underperformance … I tested the strategy from 1999 through the end of 2025.
Now, you may assume that a lower return is due to the natural conservatism of large stocks, right? That’s the price you pay for safety?
Nope.
There was no meaningful improvement to the portfolio’s volatility, and the 2% megacap portfolio actually had a worse maximum drawdown, falling 66% vs 55% for the S&P 500 during the 2008 Great Financial Crisis.
I wasn’t done.
As you know, I evaluate stocks through the lens of my proprietary Green Zone Power Ratings system, which rates stocks based on a composite of momentum, size, volatility, quality, growth and value factors. My research has proven that each of these six factors beats the market over time (when applied to the entire market of individual stocks).
But… not on mega-caps.
I ran the numbers, testing each of the six factors individually on the megacap portfolio. I created six portfolios of megacap stocks that also rated as “Bullish” on each of the six factors. Five of the six still produced returns that lagged the broader market.
The only exception was the Quality factor. The portfolio of megacap stocks that also rated as “Bullish” on their quality factor did indeed beat the market… but not by enough to get us excited.
Long story short … If you’re pinning your hopes and dreams (or retirement) on megacap stocks, you’re setting yourself up for disappointment. Why Megacaps Underperform Frankly, our conclusion today shouldn’t be all that surprising when you tune out the mainstream media and consider the basic math. As companies get bigger, each new dollar of profit moves the needle less. A $4 billion company can double by finding another $4 billion opportunity.
But a $4 trillion company? Another $4 trillion opportunity is a lot harder to come by. Apple is a $4 trillion company. What exactly would Apple need to do to create another $4 trillion in value? Revolutionize the world again with another product as big as the iPhone?
Beyond that, by the time a stock has risen to the point that it’s one of the largest companies in the world, it’s already likely overpriced.
But more than overpriced, it’s overowned. There’s no one left to buy. Every index fund, mutual fund, hedge fund and mom-and-pop investor already owns it. Today, who doesn’t already have an outsized position in Apple or Nvidia? (If you own an S&P 500 index fund, then yes, you have an outsized position in both.)
Does this guarantee that the Mag 7 will crash and burn?
No. And I’m not preaching some “doom and gloom” story of the Mag 7’s future.
But it absolutely tells me we can find better opportunities elsewhere. As I wrote yesterday, we can adapt.
I’ll be going into detail on that tomorrow at 1 p.m. I’ll walk you through some of the market-crushing returns we generated last year, including some of the successful trades in my “Tech Titans” portfolio, which handily beat the market by 300% in 2025.
I’m 100% certain that all serious investors will leave my live presentation with confidence in their 2026 “Beat the Market” action plan – plus, I’ll be allowing time for a 100% live Q&A session that will last for as long as you have questions for me.
By the way, be sure to watch your inbox for tomorrow’s edition of What My System Says Today. We’ll be giving you an update on the most recent reconstitution of the Nasdaq 100 index, which I use as the “fishing pond” for my Tech Titans portfolio. Six stocks got the boot, six new stocks have been added … and I’ll tell you exactly what to do about it.
To good profits, 
Adam O'Dell
Editor, What My System Says Today
| 'A huge surprise is in store for millions of Americans in 2026.'
Those are the words of wildly successful futurist, Mark Jeftovic.
But the future that's coming is not what you might suspect.
More and more Americans seem to think they don't have enough money… for good reason. The cost of living is out of control.
But if this noted futurist is correct? The typical American could receive a huge raise this year.
'Everyone from cashiers and bartenders… to working professionals and teachers. I won't be surprised if they get a 25%... even a 50% boost in salary.'
According to Jeftovic… This strange outcome has occurred a few times in modern history – each time with a similar result.
It all has to do with a strange force rippling through the economy.
We recently caught up with Jeftovic to get the full story behind his prediction. And after spending hours together, we edited it all down to a short interview.
Chances are, you won't believe why this is happening… And what it could mean for you in the months ahead.
But at the very least you will be prepared when events take a wild turn in 2026. Click here now. | |
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