A ‘once-in-a-generation’ market opportunity thanks to some unfamiliar names

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Stock traders on the exchange trading floor.

Stock tradersDrew Angerer/Getty Images

Welcome back! Starbucks’ limited-edition red, stainless steel “quencher” has the type of valuation surge most startups would die for. The 40-ounce tumbler, made with Stanley and retailing for $49.95, is being resold for as much as $300 online.

In today’s big story, we’re looking at why the market might be on the cusp of a once-in-a-generation investing moment (but not with the names you’re familiar with).

What’s on deck: 

But first, I took the one less traveled by.


The big story

Under the radar

A trader looks at market charts on the floor of the New York Stock Exchange.

A trader looks at market charts on the floor of the New York Stock Exchange.

A trader looks at market charts on the floor of the New York Stock Exchange on January 18, 2023.Angela Weiss/AFP/Getty Images

When it comes to the stock market, the real value is in the crumbs.

Instead of worrying about the status of the much-ballyhooed Magnificent Seven stocks, investors should be focusing on under-the-radar stocks, according to investment chief Richard Bernstein.

The former chief investment strategist at Merrill Lynch views the chance to get in on less-glamorous stocks as a “once-in-a-generation” opportunity.

Bernstein’s thesis for looking outside the Magnificent Seven is fairly straightforward: the number of stocks notching big gains is about to broaden, giving unloved stocks a resurgence.

“Are these seven really the best growth stories in the entire global equity market?” he told Insider’s Jennifer Sor.

The data backs Bernstein. Over 100 US companies saw at least 25% earnings growth in the past 12 months, but only one (Amazon) was a Magnificent Seven.

A graph showing companies' earnings growths from 25% upward, with an arrow pointing to the only Magnificant Seven company.

A graph showing companies’ earnings growths from 25% upward, with an arrow pointing to the only Magnificant Seven company.

Just 1 Magnificent 7 firm posted more than 25% earnings growth as of October.Richard Bernstein Advisors

Outside-the-box thinking might be investors’ best bet these days.

A note from Bank of America pointed to its Sell Side Indicator, which flashes bullish signals when Wall Street becomes overly bearish.

The contrarian sentiment gauge is currently neutral, but it’s three times closer to a “buy” signal than a “sell” one. At its current level, it’s suggesting about a 15.5% gain in the S&P 500 over the next year.

Such strong stances come at a unique time for the market, as many investors are waffling over where things are headed.

Any positives for the market — strong earnings, GDP growth, pause on rate hikes — have been coupled with negatives — troubling year-end forecasts, rising bond yields, increasing geopolitical risks — over the past few months.

Having conviction and staying away from popular stocks might be investors’ best bet.

Of course, it won’t happen overnight. Bernstein told Jennifer not to expect a similar market rally in the wake of the pandemic. A more accurate comparison, he said, would be when S&P 500 leaders lost value in the 2000s while underdogs performed.


News brief

Your Monday headline catchup

A quick recap of the top news from over the weekend:

3 things in markets

new york stock exchange kids

new york stock exchange kids

Victoria Parrinello sits inside her father’s booth on the floor of the New York Stock Exchange, November 27, 2015.REUTERS/Brendan McDermid

  • What last week’s “baby rally” means for the market going forward. Fundstrat’s Tom Lee sees fundamental and technical reasons for the market to keep the momentum going. A strong earnings season and Wall Street’s fear gauge plummeting are all good signs.

  • Charlie Munger sounds off. Warren Buffett’s right-hand man talked about everything from bitcoin to the woes of stock picking during a recent interview. Munger, who’s worth nearly $3 billion, said there’s a 50/50 chance Berkshire Hathaway will make another big acquisition. Check out eight of his best quotes.

  • The end of the AI market boon. Veteran investor Bill Smead says the AI craze is overblown and sees a painful comedown for stocks. “AI looks like tech stock and S&P 500 index life support to us,” Smead said.

3 things in tech

Light Phone 2

Light Phone 2

pgLang

  • Good kid, ‘dumb’ phone. Rapper Kendrick Lamar’s creative agency’s new, no-frills phone has already sold out. Light Phone 2, which is priced at $299, offers a minimalistic experience without apps or color.  

  • All the best bits from Elon Musk’s chat with the British prime minister. The billionaire was interviewed by Rishi Sunak following his appearance at the AI Safety Summit. Musk touched on the future of jobs and government regulation. These are the best quotes.

  • Linda Yaccarino puts her foot down. The CEO of X reportedly stepped in to remove a viral pro-Hitler post on the platform. The move comes despite X owner Elon Musk being an unapologetic proponent of free speech.


3 things in business

Photo collage representing Gen Z's future wealth

Photo collage representing Gen Z’s future wealth

carles miro/Getty, We Are/Getty, jacoblund/Getty, Tyler Le/Insider

  • Gen Z is all about that money. Having watched older generations struggle with personal finances, Gen Zers are proving to be financially savvy. According to one survey, most Gen Zers are already saving for retirement.

  • The Ozempic impact on the economy. The knock-on effects of weight-loss drugs are almost innumerable. One of the big winners, according to an expert, is “better-for-you products” as people focus more on lifestyle and fitness.

  • How companies decide who’s on the chopping block. An expert in helping companies communicate layoffs offers an inside look at the process. One thing to remember: it’s more often related to tightening margins versus actual performance.


In other news


What’s happening today

  • Trump takes the stand. Former President Donald Trump is expected to testify in the civil fraud trial against the Trump Organization.

  • OpenAI opens its doors. The buzzy AI startup hosts its inaugural developer conference, OpenAI DevDay.

  • Happy Saxophone Day! The holiday corresponds with the birthday of the instrument’s inventor, Adolphe Sax.


For your bookmarks

Martha knows best

Martha Stewart attends the FGI Night of Stars in New York City on October 17, 2023.

Martha Stewart attends the FGI Night of Stars in New York City on October 17, 2023.

Martha Stewart attends the FGI Night of Stars in New York City on October 17, 2023.Lexie Moreland/Getty Images

Martha Stewart told Insider the five recipes everyone should learn how to make. From a couple of tasty pies to a simple salad vinaigrette, check them all out here.


The Insider Today team: Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.

Read the original article on Business Insider

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