Trivariate Research has introduced a new selection of companies labelled “Non-Tech Compounders” aimed at investors who wish to diversify beyond high-growth tech stocks. Founder and CEO Adam Parker mentioned in a recent client report that their outlook on U.S. stocks is neutral as the year begins. With indexes like the S&P 500 and Dow Jones Industrial Average hitting record highs recently—and the Nasdaq Composite just shy of its peak—there’s a growing concern that valuations might be too stretched. This is especially relevant given geopolitical tensions and the potential challenges companies might face in meeting ambitious earnings forecasts. Trivariate cautions that current expectations for S&P 500 earnings might be overly optimistic, particularly within the tech and industrial sectors, as the repercussions for missing Wall Street’s targets can be quite harsh.
The researchers also express doubt about whether median stock prices in the S&P 500 can continue to deliver returns, noting that future cuts to Federal Reserve interest rates may not boost expected price-earnings ratios to the same extent as seen in recent years. In a bid to help investors navigate potentially weaker segments of the market, Trivariate has put together a list of 20 non-tech stock options, which includes names like Amazon and NextEra Energy. As of January 9, this collection, referred to as “non-technology composites,” noted a year-to-date gain of 2.2%, slightly lower than the 2.4% return of the ProShares S&P 500 Legacy Technology ETF.
Among the stocks in Trivariate’s selection, e-commerce leader Amazon seems to be underperforming compared to other tech giants. Despite a 13% rise over the last year, Amazon has recently gained positive attention from analysts, thanks to its prolonged partnership with OpenAI, robust growth in Amazon Web Services, and initiatives in emerging technologies like custom silicon. Analysts suggest that Amazon’s stock has approximately 17% upside potential based on consensus price targets.
Philip Morris International, the tobacco powerhouse, also underwent a trivariate analysis. Its shares, typically characterized as cyclical yet defensive, have appreciated more than 44% over the past year as investors grow optimistic about the company’s efforts to boost demand for its oral nicotine pouch “Zyn” in the U.S. market. Another name to watch, NextEra Energy, has seen a 23% increase. This growth is attributed to consistent profit advancements and long-term contracts with clients like Google and Meta Platforms, which require clean energy solutions for their data centers. Parker also highlighted stocks like Visa, Uber Technologies, and Booking Holdings as noteworthy prospects.
