Investors are shifting their focus away from Big Tech and may see the dominance of Magnificent 7 stocks wane.
Barron’s reports that while the market leaders, such as Nvidia Meta and Amazon, continue to make gains, other sectors have begun to outperform.
The Roundhill Magnificent 7 exchange-traded funds has increased by 1.5% in the past year, thanks to Meta and Amazon reaching new highs.
This increase is still behind the S&P500’s 3.3% gain and the Invesco S&P Equal Weight ETF’s 3% rise, indicating that investors are looking for more than just the tech giants to get returns.
Brad Long, chief executive officer of Fiducient Advisors noted that although Big Tech has driven market growth in recent decades, the sustainability of this trend on a long-term basis is uncertain. He said:
It is difficult to sustain the success of a few companies over the long-term.
“Investors are accustomed to concentration. But that can be a liability.” Long said that being aware of this risk is important, as the market has been priced to perfection.
Barron’s searched FactSet for companies that were reasonably valued and trading below the average market price of 22 times projected earnings by 2025.
Chevron Hershey are both attractive bets
Energy and consumer staples stocks are a good choice for investors looking for new opportunities.
Several major oil companies, including Exxon Mobil and Chevron as well as ConocoPhillips and Phillips 66 and Marathon Petroleum are trading at attractive prices.
Enphase, a renewable energy company, has also attracted attention for its strong earnings.
Don Townswick of Conning, the managing director, stated in a report that energy stocks were particularly attractive due to their dividend yields as well as potential price appreciation.
He said that now is the time to invest in beaten-down sectors such as consumer staples, due to potential improved earnings, as well as price appreciation as dividend growth.
Hershey, a company that has reported solid results and attracted investors seeking stability, is also a good investment.
The chocolate maker has a dividend yield that is nearly 4%. This makes it a good income play.
Other consumer staples such as Keurig Dr Pepper and General Mills also stand out in an uncertain market.
Cory Martin, CEO at Barrow Hanley, believes that both consumer staples and energy shares have significant value.
His firm owns shares in Keurig Dr Pepper despite concerns about the impact of the GLP-1 weight-loss drugs.
Healthcare, financials and undervalued technology stocks
Investors are increasingly looking to healthcare and financials as well as energy and consumer staples.
The stock prices of pharmaceutical companies like Merck, Pfizer, and health insurers Cigna and Centene are reasonable.
Regional banks like Fifth Third, KeyCorp PNC and Regions Financial, as well as KeyCorp, PNC and Regions Financial, are also seen as attractive investment opportunities.
Artificial intelligence hype is not driving all technology stocks to sky-high valuations.
Companies like Cisco, Dell Micron, NXP Semiconductors, Qualcomm and Texas Instruments are undervalued in comparison to the larger market. This offers the potential for growth, without excessive risk.
Investors are broadening their focus as markets continue to shift. They appear to be favoring sectors which offer a balance between growth, value and stability, beyond the Magnificent Seven.
This post These S&P 500 Stocks Could Benefit From Rally Expansion Beyond the ‘Magnificent 7’ may be updated as updates unfold
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