Capital Market Veteran: Unfollow crowded mega-cap tech stocks, instead increase holdings in low-priced financial stocks

Senior value investor Bill Nygren, who has been a fund manager at Oakmark Funds for 40 years, warns that the diversification of the S&P 500 index is not as good as before, and he is looking for undervalued stocks outside the technology sector.

On Monday, September 23rd, Nygren appeared on CNBC's "Money Movers" and stated:

"The technology sector in the S&P 500 index has become extremely strong, with about 25 of the largest companies accounting for approximately half of the index. Therefore, it is not as diversified as investors might imagine. I expect investors may reconsider the idea of ​​viewing the S&P 500 index as a low-risk stock investment."

As a small number of large technology stocks, such as Nvidia and Meta, drive the S&P 500 index to consecutive new highs, many other stocks have not risen in sync, leading to a narrow distribution of this rise. Many see this as a sign of potential fragility in the market, suggesting that the current bull market may not be stable, as it relies too much on the performance of a few stocks rather than broad market participation.

Furthermore, technology stocks and other growth stocks have performed strongly in recent years, attracting a lot of attention and capital inflows from investors, causing value stocks to be relatively overlooked. Due to this negative bias, value stocks may be undervalued, providing an opportunity for investors looking for cheap stocks. Nygren stated:

" Negative views on value stocks prompt him to look for companies with low valuations and large-scale stock buyback programs, so even without the follow-up of other investors, the stock price will appreciate on its own. For us, it has become extremely important to invest in companies that take active measures and use excess funds to repurchase their own stocks."

He specifically mentioned Corebridge Financial in his investment portfolio, a $15 billion market cap retirement services and life insurance company that was recently spun off from American International Group (AIG). Corebridge's stock is currently trading at around $28 per share, and Nygren expects the company's book value per share to increase to $50 by the end of 2025. Nygren mentioned:

"The company may repurchase up to 20% of its stock annually. This company is not well known to the public. They do not need to rely on other investors to recognize their value. They just need to continue reducing the number of outstanding shares."