No. 1 Thing the Magnificent Seven Stocks Have in Common

Here’s a question for you…

What do these seven companies have in common?

Apple.
Amazon.
Meta (Facebook).
Microsoft.
Nvidia.
Alphabet (Google).
Tesla.

These are “the Magnificent Seven,” and they drove much of 2023’s stock market gains.

They each more than doubled the S&P 500’s 24% return that year.

With gains ranging from 48% to 239%…

“Magnificent Seven” Stocks

Note: As of February 28, 2024

But here’s what they all have in common…

The Magnificent Seven are all managed by their founders — or were for a very long time.

If you’re looking to make big returns in the stock market, investing in founder-led companies can really stack the odds in your favor.

And not just in the short term.

In fact, a 2014 study by professors at Purdue’s Krannert School of Management found that over a 15-year period, founder-led companies beat the market by over 3X.

So, why do founder-led companies outperform? I’ll share why, and how you can use this strategy to make more profitable investments.

The Founder’s Mentality

A couple of weeks ago at my “Ask Me Anything” session of our Total Wealth Symposium, a nice gentleman asked me how I select my recommendations.

I loved answering all your questions at the Total Wealth Symposium!

Now, there’s a lot that goes into that. And I’ve have more than 40 years of experience. But it all boils down to this… I read.

I read everything I can get my hands on — shareholder letters, company 10-Ks, academic studies and books. Sometimes to my wife’s annoyance when she’s trying to sleep and my book light is still on.

And one book I recently read — The Founder’s Mentality — shed a light on three features founder-led companies have that set them apart.

Founders have business insurgency. They tend to wage war on industry norms on behalf of undeserved customers.
Founders have a frontline obsession. They drill into the details and make heroes of their frontline workers.
Founders take personal responsibility for the success of the business at every level.

A great example of this is Herb Kelleher and Southwest Airlines.

Forbes put it this way:

“Herb and the people of Southwest Airlines … did it with a disruptive business model and a hard-to-replicate culture.”

Herb wanted his business to inspire people to fire on all cylinders because they knew they were doing great work.

He let his values and his passion for fairness drive Southwest’s operating strategy; not the behavior of other carriers.

He wasn’t afraid to question established ways of doing things.

For example, while other airlines assumed that you had to use a “cattle-car” approach to boarding passengers and first-class seating, Southwest has no first-class seating and lets passengers pick their seats on a first-come-first-serve basis.

He had the Founder’s Mentality by the bucket-load, and as a result, Southwest Airlines became one of the most successful airlines in history.

Its stock is up a massive 16,160% since 1980.

So, anyone who invested $1,000 into Southwest Airlines in January 1980 and held onto it is sitting on more than $160,000 today.

As you can see, companies that are managed by their founders have massively outperformed.

That’s why it’s one of the five key traits of an OMEGA stock…

It’s what the “M” in OMEGA stands for — managed by the founder.