Hidden gems to consider over the Mag 7: IG North America CEO

This week, many of the Magnificent Seven component stocks — including Amazon (AMZN), Apple (AAPL), Alphabet (GOOG, GOOGL), Meta (META), and Microsoft (MSFT) — will be releasing their latest quarterly earnings results. Investors eagerly await as these companies hold much of the value of the S&P 500 (^GSPC) and may set the tone in the broader market going forward. While these companies continue to dominate the conversation on Wall Street, are there alternatives investors can look towards to maximize their portfolio?

IG North America CEO JJ Kinahan joins Yahoo Finance to discuss the upcoming busy earnings week for the Magnificent 7 and give insight into what appears to be bullish activity for options trades from retail investors.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

SEANA SMITH: Five of the Magnificent Seven stocks reporting results this week. And their results could be critical here for the market's momentum. So what should investors expect? And how could this potentially impact your investment portfolio? To break that all down, we want to bring in JJ Kinahan. He's the IG North America's CEO. And JJ, it's great to have you on set with us here this morning.

JJ KINAHAN: Thanks for having me, guys. You know, it's interesting. I was just sitting here thinking as you guys were talking to Josh, how often is it that you have a Fed meeting and an employment report in the same week and they're really not the top story? It's pretty amazing.

SEANA SMITH: So put that further in perspective for our viewers, right? When we talk about how critical these earnings results are here from five of the seven Magnificent Seven stocks here that we've been talking about ad nauseam for the last 12 or 14 months, in terms of setting the tone here for the markets, what do you think we'll learn this week?

JJ KINAHAN: Well, I think Josh hit it right. You look at their earnings are incredible compared to what's going on in the rest of the market. You don't often see this where a few stocks are just so outperforming the rest of the market and have really continued to take the rest of the market on their back as we go higher.

Now, what I do find interesting is there's a couple of names this-- First of all, there's 106 of the S&P 500 reporting this week, so that's absolutely incredible. Secondly, there are some names outside these ones that we all talk about every single day that I'm looking at this week.

You have UPS reporting this week. Why do I care about UPS? You had FedEx talking about a slowdown in consumers' shipping and spending. Well, UPS back that up and say we're seeing a slowdown. We saw this incredible holiday season for consumer spending. Now that the credit card bills have hit, what's January and February going to look like? And I think that that's something that we really have to continue to watch overall.

And we also have GM this week. What are they going to say about electric vehicles because that directly affects one of the Magnificent Seven being Tesla? We know that they've scaled back on it. So I think that outside these ones that are, of course, just amazing stocks, perform every day, the AI I think will probably be the primary theme in there, there are some other really interesting stocks that I don't think people should overlook this week.

BRAD SMITH: Just as a follow up on that, is there one specific Magnificent Seven name that's reporting this week that is a bellwether even among those that are coming forward here and tells us a little bit more about the economy that investors perhaps need to know?

JJ KINAHAN: I think it's Amazon. And the reason I say Amazon is all the different businesses they're in. They have retail. They have media. They have Amazon Web Services. They're developing chips-- I shouldn't say actually developing, but they're involved in AI, et cetera-- all the things that Amazon is involved with.

And I think that sometimes they're involved with so many things, we kind of forget all the different areas that are influenced. So that's one that I think as a retail investor who I deal with every day, people should just look at the different areas they're involved with and see how they're doing across the board, not just the headline number. That's one where it's probably worth just reading a few paragraphs down on the story and not just the headline.

SEANA SMITH: And JJ, when we talk about investors trying to get exposure here to this market, we have stocks here at record highs. It's also options week at Yahoo Finance, and we're going to be digging into a number of angles when it comes to options and some of the trades that are available out there for retail investors. I'm curious from your perspective and the data that you've been following, what has interest been like from a retail perspective outlet there? And then in terms of what investors should or need to keep in mind when they're considering options, what would your advice be?

JJ KINAHAN: Yeah. So first of all, I think the interest continues to explode. We see the OCC, which is the Options Clearing Corporation, which clears every single options trade done on an exchange, retail traders will always trade through an exchange on options, we've seen them continuing to set records. I think the reason is the biggest underrated thing about retail investors is how great they are at managing capital.

A professional trader never really thinks that much about the capital they're putting up per trade. A retail trader always thinks because they have a limited amount of capital. So how much am I allocating to every single trade? It's a really important consideration. The biggest thing I would say to retail traders getting started is stay small to start. I mean, I know I work for a brokerage firm, I should be like, spend everything. No. But quite honestly, stay small to start.

The smaller you stay, you'll get as much-- if you're just starting out, you'll have as much pain and suffering in one contract as you will in 10 as you start to learn. Staying small, defining your risk up front are the two biggest things anybody can do to truly learn how the options market works. You know, I traded on the SIBO floor for 21 years, and it was the very first thing that I was taught. Always stay small. The easiest thing in the world to do is to become a bigger trader.

BRAD SMITH: And so what, with that in mind, has been the most attractive options trade that you've seen?

JJ KINAHAN: Well, I don't know if I'll say the most attractive options trade that I've seen. How about this, I'll tell you some of the areas that our clients have been trading in. And a really interesting one has been Ulta. Very bullish activity in Ulta, very--

BRAD SMITH: That's beauty?

JJ KINAHAN: Yeah, Ulta Beauty.

BRAD SMITH: Beautiful.

JJ KINAHAN: Well played. And CVX has also been. And then on a bearish side, we've seen Lululemon, which I found kind of maybe odd. And AT&T.

SEANA SMITH: Are you seeing activity in some of these big tech names? You talk about the fact that there's been such a run up, investors looking for other ways to play it. What are you seeing there?

JJ KINAHAN: Well, you know, it's interesting because if I look at our top 10 every day, you're going to see these names involved in there. You guys talk about them every day. They're what's driving the market overall, so people are interested in them. So yes, absolutely. We're seeing a bit of a bullish tinge to most of them. Probably Microsoft has been the one that has been the most bullish heading in their earnings.

BRAD SMITH: JJ, great to kick off the week with some of your insights here. Thanks for joining us.

JJ KINAHAN: Thanks, guys. Thanks for having me.

BRAD SMITH: Absolutely.