Big
Tech
was
the
stand-out
performer
last
year,
as
investors
piled
into
the
so-called
“Magnificent
Seven”:
Alphabet
,
Amazon
,
Apple
,
Meta
,
Microsoft
,
Nvidia
and
Tesla
.
While
tech’s
potential
—
driven
in
large
part
by
the
hype
around
artificial
intelligence
—
continues
to
put
these
stocks
in
the
spotlight,
one
investment
strategist
says
some
lesser-known
U.S.
small
caps
are
much
more
attractive
plays
right
now.
“The
Magnificent
Seven
stocks
generally
are
starting
to
run
out
of
steam
at
this
point
because
their
valuations
are
getting
pretty
full
at
this
point
of
time,”
Morningstar’s
Chief
Markets
Strategist
David
Sekera
told
CNBC
Pro
on
Feb.
2.
He
said
Morningstar
expects
market
gains
this
year,
but
that
“we
are
looking
for
the
market
to
spread
out,
away
from
the
Magnificent
Seven.”
“With
the
rate
of
economic
growth
slowing,
but
not
necessarily
going
into
a
recession,
and
interest
rates
coming
down
slowly
over
the
course
of
the
year,
I
think
that
sets
the
year
up
pretty
well
for
value
stocks.
And
I
think
those
same
attributes
will
help
the
small-cap
category
as
well,”
Sekera
added.
The
Russell
2000
,
the
benchmark
for
small-cap
stocks,
has
had
a
tough
start
to
the
year
so
far,
down
around
3.5%.
The
S
&
P
500
,
Dow
and
Nasdaq
100
,
in
comparison, have
all
hit
new
all-time
highs.
However,
Sekera
thinks
things
are
looking
up
for
small-caps
and
value
stocks
—
the
latter
of
which
he
says
are
trading
at
an
11%
discount
relative
to
Morningstar’s
fair
value
and
look
like
a
“good
area
for
investors
to
overweight
in
U.S.
stocks
right
now.”
Tech
stocks
The
chief
strategist
remains
bullish
on
tech,
albeit
outside
of
the
Magnificent
Seven,
and
named
Cognizant
Technology
Solutions
and
Snowflake
as
picks
to
play
the
theme.
Calling
both
companies
“second-derivative
AI
plays,”
Sekera
likes
them
for
their
role
in
building
out
the
AI
systems
that
will
potentially
be
used
across
sectors.
Value
in
energy
The
energy
sector
—
one
of
the
laggards
of
the
stock
market
last
year
—
is
also
on
Sekera’s
radar.
“We’re
actually
now
starting
to
see
values
in
the
energy
sector
that
we
haven’t
seen
for
quite
some
time,”
he
said,
naming
ExxonMobil
and
APA
Corp
as
top
picks.
Morningstar
gives
stocks
a
rating
of
between
one
and
five
stars,
with
a
top
rating
indicating
that
the
shares
are
undervalued.
It
has
a
four-star
rating
on
Exxon,
given
that
it
is
trading
at
a
17%
discount
to
fair
value,
has
a
dividend
yield
of
3.7%,
and
will
resume
its
“very,
very
large”
share
buyback
plan.
Sekera
described
it
as
“the
most
undervalued
of
the
global
[oil]
majors
right
now.”
The
company
last
week
reported
quarterly
earnings
that
beat
analysts’
expectations,
but
profit
fell
compared
to
a
year
before
on
lower
oil
prices.
Fellow
energy
player
APA
also
has
a
four-star
rating
from
Morningstar.
“Our
analyst
doesn’t
think
that
the
market
right
now
is
giving
the
company
very
much
—
or
even
any
—
credit
towards
a
discovery
in
Suriname,”
Sekera
said,
referencing
an
oil
drilling
project
the
company
has
embarked
on
with
French
energy
major
TotalEnergies
.
“This
discovery
—
if
it
starts
to
get
developed
—
could
actually
double
APA’s
production
over
the
next
10
years.
So,
this
is
one
stock
I
think
is
interesting
from
the
hard
catalyst
perspective,”
Sekera
added.
Go-to
utilities
picks
Sekera
said
that
utilities
stocks
in
particular
had
fallen
under
the
radar
after
getting
“hammered
last
year
as
interest
rates
were
rising.”
He
said
the
market
traded
down
“way
too
much”
on
utilities,
and
“that
overcorrected
the
utility
sector
too
much
to
the
downside.”
“Right
now,
utilities
are
trading
at
about
a
9%
discount
to
fair
value
at
a
sector
level,”
he
added,
identifying
Entergy
Corp
,
WEC
Energy
and
NiSource
as
his
picks
to
play
the
sector.
“Entergy
has
been
our
go-to
stock
in
this
space,”
the
strategist
said,
adding
that
the
electricity
firm
has
a
four-star
Morningstar
rating,
and
is
trading
at
a
17%
discount.
Another
four-star
rated
stock,
electric
services
player
WEC
Energy,
has
“some
of
the
best-in-class
management
in
the
utility
space,”
Sekera
said,
adding
that
the
company
has
above-average
growth
opportunities.
As
for
NiSource,
the
strategist
believes
that
the
five-star-rated
stock
“has
a
very
good
runway
of
long-term
growth,
and
is
one
of
the
leaders
in
the
Midwest
in
the
United
States
in
growing
its
renewable
energy
portfolio.”