Why FICO and Intuit Now Outshine the Magnificent 7

Summary

The market’s biggest opportunity may have shifted from the Magnificent 7 to two former premium stocks that have fallen roughly 40% and 51% this year. Market leadership is broadening: the average S&P 500 stock is up around 15%, versus roughly 13% for the cap-weighted index, while the Magnificent 7 are up only around 5% on an equal-weighted basis. Berkshire Hathaway’s move from persistent selling to renewed investment reinforces that shift. It bought $10 billion of Google stock, spent roughly $4.5 billion repurchasing its own shares, and acquired Taylor Morrison for $6.8 billion. However, Berkshire near $521, Alphabet near $350, and Microsoft near $500 appear closer to fair value than clear bargains. Alphabet’s AI spending has pressured free cash flow, while Microsoft remains cash-flow positive but needs around 19.4% long-term growth to justify its valuation. The sharper opportunities may be Fair Isaac and Intuit. FICO has dropped 38% year to date to around $1,000, yet retains 85% gross margins and strong projected growth; its valuation requires only around 9.4% growth. Intuit has fallen from around $750 to $325, despite projected revenue growth of 13.5% and free-cash-flow growth around 21%. Its immediate weakness reflects price-sensitive customers earning below $50,000, not demonstrated AI disruption. The central strategy is to seek businesses where prices have fallen much faster than intrinsic value.