By Paul R. La Monica

The Magnificent Seven are still alive and well, despite the DeepSeek-inspired dip in shares of Nvidia this year.

Thanks in large part to Meta Platforms and Amazon.com, which have both surged to all-time highs, the Roundhill Magnificent Seven exchange-traded fund is still up a respectable 1.5% this year. But that's not as magnificent as the rest of the market.

The rally has once again begun to broaden out this year, much as it did last summer before the election. The Invesco S&P 500 Equal Weight ETF has gained more than 3% so far in 2025, outperforming the Magnificent Seven and roughly in line with the market cap weighted S&P 500 index, which is dominated by those techs and other megacaps. The S&P 500 is up 3.3%.

This trend could continue. Investors might have finally come to the realization that Big Tech can't keep growing at a breakneck clip indefinitely.

"Over the longer-term, the continued, repeated success of a handful of companies is difficult to sustain," said Brad Long, managing partner and chief investment officer with Fiducient Advisors.

"Investors have become accustomed to concentration, but that can be a liability. Being aware of that risk is very important," Long added, noting the market is now priced close to perfection.

With that in mind, we decided to look for stocks in the S&P 500 outside of the Magnificent Seven that are good candidates to help lead the market higher. Barron's used the screening tool on FactSet to search for companies that are reasonably valued, trading below the market average of around 22 times 2025 earnings estimates.

Several big oil and energy companies made the cut, including Exxon Mobil, Chevron, ConocoPhillips, Phillips 66, and Marathon Petroleum. So did solar energy firm Enphase, which recently reported strong earnings.

Energy stocks also tend to pay big dividends, which make them potentially more attractive at a time when volatility has returned to the market. The recent decline in longer-term bond yields as inflation worries fade also boosts their allure.

Hershey, which reported solid results Thursday morning, made it through our screen. The candy king is a good income play, too. Its dividend yield is nearly 4%. Several other consumer staples stocks with healthy yields also look attractive, such as Campbell's, General Mills, and Keurig Dr Pepper.

"Now would be the time to get into beaten down sectors like consumer staples due to potentially improved earnings as well as price appreciation and dividend growth," said Don Townswick, managing director and equity portfolio management at Conning.

Cory Martin, CEO of Barrow Hanley, said he sees big value in both staples and energy stocks. His firm owns Keurig Dr Pepper. Martin said consumer stocks have been oversold due to concerns about GLP-1 weight loss drugs.

Healthcare and financials, two other value-oriented sectors known for solid dividends, also have plenty of stocks trading below market multiples. Pharmaceutical companies companies Merck and Pfizer and health insurers Cigna, Centene, and Elevance Health made it through our screen. And within financials, regional banks Fifth Third, KeyCorp, PNC, and Regions all look attractive.

Finally, even some tech companies made the list. Cisco, Dell, Micron, NXP Semiconductor, Qualcomm, and Texas Instruments trade at multiples below the S&P 500, proving that not all tech stocks are getting an absurd artificial intelligence premium.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 06, 2025 14:33 ET (19:33 GMT)

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