This is the last part of our seven-part series focusing on the top stock picks for the upcoming year. We’re looking at the so-called “Magnificent Seven” stocks.
To sum it up: Tesla found itself in last place, with Apple in the sixth spot, Amazon fifth, Alphabet fourth, Nvidia third, and Meta Platforms pulling in at number two.
As for the top choice, Microsoft (NASDAQ: MSFT) has been identified as the best stock from the Magnificent Seven to invest in for 2026. I think it’s actually my top pick overall, especially for the S&P 500, which seems solid for a 3-5 year hold.
Now, while Microsoft may not match the explosive growth rates seen with companies like Nvidia or Tesla, it’s valued for its remarkable profit margins.
Microsoft stands tall as the second-largest player in cloud services, right behind Amazon Web Services. The company boasts an impressive suite of integrated software, including Microsoft 365 with apps like Word, Excel, and Teams. Plus, it has a stake in gaming with Xbox and Activision Blizzard, not to mention LinkedIn and GitHub in its portfolio.
Many established tech companies often spread themselves too thin and struggle to innovate, which leads to stagnant growth. Microsoft, however, is experiencing a growth spurt right now, with operating margins reaching highs not seen in a decade.
Its forward price-to-earnings ratio sits at 29.8x—while that’s not as low as Meta Platforms, it remains a fair price against its historical value.
Microsoft also has a stronger record than the other Magnificent Seven in generating consistent, profitable growth and returning value to shareholders through buybacks and dividends.
Outstanding shares have been declining steadily as buybacks outpace stock compensation. On September 15, management revealed a 10% increase in dividends, marking the company’s 16th year of consecutive raises. Notably, it has the highest yield among the Magnificent Seven at 0.8%.
While nothing is truly perfect, Microsoft is about as close as you can get with an American company.
Looking ahead to 2026, there aren’t any apparent weaknesses in our investment outlook. The company remains highly profitable, diverse, and innovative, tapping into growth trends such as AI.
Microsoft seems well-prepared for whatever changes come in the next few years. Even if a recession hits, I believe the company can weather it well.
Should the AI boom continue, it stands to benefit significantly.
Even if Microsoft’s OpenAI were to lose ground against competitors like Alphabet’s Gemini and Anthropic’s Claude, it still has room to grow.
Sure, Microsoft might not deliver the most spectacular returns like the other Magnificent Seven in the next few years, but it holds a solid position to consistently outperform the S&P 500 over time.
All things considered, Microsoft has the potential to be a fundamental investment for both growth and value investors.
Before you decide to acquire Microsoft stock, keep in mind that Motley Fool Stock Advisor has identified some other stocks they consider the Best 10 stocks to invest in right now… and Microsoft isn’t one of them. These stocks could yield impressive returns in the coming years.
Just for perspective, if you had invested $1,000 in Netflix when it was first recommended back in December 2004, you’d be looking at $540,587 today!* And for Nvidia, if you’d invested back in April 2005, that $1,000 would have grown to $1,118,210.*
It’s notable that the Stock Advisor has an average return of 991%, while the S&P 500 has returned just 195%. If you’re interested, don’t miss out on the latest Top 10 list from Stock Advisor, designed for retail investors.
*Stock Advisor returns as of December 8, 2025
Disclosure: I hold a position in Nvidia, and The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.
