Veteran Investor: Ditch Overcrowded Tech Giants, Boost Undervalued Financial Sto

Senior value investor and 40-year fund manager at Oakmark Funds, Bill Nygren, warned that the dispersion of the S&P 500 index has significantly decreased, and he is looking for undervalued stocks outside the technology sector.

On Monday, September 23rd, Eastern Time, Nygren appeared on CNBC's "Money Movers" program and stated: "The technology sector within the S&P 500 index has become extremely dominant, with approximately 25 of the largest companies accounting for about half of the index's investments.

As a result, it is not as diversified as investors might think.

I anticipate that investors may reconsider the notion of viewing the S&P 500 index as a low-risk stock investment approach."

When a small number of large technology stocks in the stock market, such as Nvidia and Meta, drive the S&P 500 index to continuously set new highs, while many other stocks do not rise in tandem, the distribution of this increase is very narrow.

This situation is seen by many as a sign that the market may be vulnerable, suggesting that the current bull market may not be solid because it relies too much on the performance of a few stocks rather than broad market participation.

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Moreover, technology stocks and other growth stocks have performed strongly in recent years, attracting a lot of attention and capital inflows from investors, leading to relative neglect of value stocks.

Due to this negative bias, value stocks may be undervalued, providing opportunities for investors looking for cheap stocks.

Nygren said: "The negative view of value stocks has prompted him to look for companies with low stock valuations and large-scale stock buyback programs, so that even without the follow-up of other investors, the stock price will appreciate on its own.

For us, investing in companies that actively take action to use excess cash to repurchase their own stocks has become extremely important."

He specifically mentioned Corebridge Financial in his portfolio, a retirement services and life insurance company with a market value of $15 billion, which has recently been spun off from American International Group (AIG).

Corebridge's stock price is currently around $28 per share, and Nygren expects that the company's stock book value will increase to $50 by the end of 2025.

Nygren mentioned: "The company has the potential to repurchase up to 20% of its stock each year.

This company is not well-known to the public.

They do not need to rely on other investors to recognize its value.

They just need to continue to reduce the number of shares in circulation."