The dominance of the Magnificent Seven stocks may be fading as investors broaden their focus beyond Big Tech.
While the group of market-leading companies, including Nvidia, Meta, and Amazon, continues to drive gains, other sectors are beginning to outperform, according to a report by Barron’s.
The Roundhill Magnificent Seven exchange-traded fund has risen 1.5% this year, helped by Meta and Amazon reaching all-time highs.
However, that increase lags behind the 3.3% gain in the S&P 500 and the 3% rise in the Invesco S&P 500 Equal Weight ETF, signaling that investors are looking beyond the tech giants for returns.
Brad Long, chief investment officer at Fiducient Advisors, noted that while Big Tech has fueled market growth in recent years, the long-term sustainability of this trend is uncertain. He said,
Over the longer-term, the continued, repeated success of a handful of companies is difficult to sustain.
“Investors have become accustomed to concentration, but that can be a liability. Being aware of that risk is very important,” Long added, noting the market is now priced close to perfection.
Barron’s used the screening tool on FactSet to search for companies that are reasonably valued, trading below the market average of around 22 times 2025 earnings estimates.
Chevron and Hershey are attractive bets
As investors seek new opportunities, energy and consumer staples stocks are emerging as strong candidates.
Several major oil and energy firms, including Exxon Mobil, Chevron, ConocoPhillips, Phillips 66, and Marathon Petroleum, are trading at attractive valuations.
Renewable energy company Enphase has also drawn attention after posting strong earnings.
Don Townswick, managing director at Conning, pointed out in the report that energy stocks are particularly appealing due to their dividend yields and potential price appreciation.
“Now would be the time to get into beaten-down sectors like consumer staples due to potentially improved earnings as well as price appreciation and dividend growth,” he said.
Hershey, which reported solid results, has also attracted investors looking for stability.
The chocolate maker offers a dividend yield of nearly 4%, making it a strong income play.
Other consumer staples companies, including Campbell’s, General Mills, and Keurig Dr Pepper, also stand out as defensive investments in an uncertain market.
Cory Martin, CEO of Barrow Hanley, sees significant value in both consumer staples and energy stocks.
His firm holds shares of Keurig Dr Pepper, despite concerns that the rise of GLP-1 weight loss drugs could impact the sector.
Healthcare, financials, and undervalued tech stocks
Beyond energy and consumer staples, investors are also turning to healthcare and financials for value.
Pharmaceutical companies like Merck and Pfizer, along with health insurers Cigna, Centene, and Elevance Health, are trading at reasonable valuations.
Meanwhile, regional banks such as Fifth Third, KeyCorp, PNC, and Regions Financial are also seen as attractive opportunities.
Even within the technology sector, not all stocks are commanding sky-high valuations due to artificial intelligence hype.
Companies like Cisco, Dell, Micron, NXP Semiconductor, Qualcomm, and Texas Instruments remain undervalued compared to the broader market, offering the potential for growth without excessive risk.
As markets continue to shift, investors appear to be broadening their approach, favoring sectors that provide a balance of growth, value, and stability beyond the once-dominant Magnificent Seven.
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