SUPERNEWS

Equities

Undervalued Stocks Like Johnson & Johnson and Alphabet Recommended Amid Market Highs

Sarat Sethi recommends buying undervalued stocks like Johnson & Johnson, GlaxoSmithKline, and Alphabet during market pullbacks for diversified portfolios.

By Bill Bullington

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3/6, 13:33 EST
Freeport-McMoRan, Inc.
Alphabet Inc.
GSK plc
Johnson & Johnson
Meta Platforms, Inc.
Microsoft Corporation
NVIDIA Corporation
Schlumberger N.V.
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Key Takeaway

  • Sarat Sethi recommends buying undervalued stocks like Johnson & Johnson, GlaxoSmithKline, Freeport-McMoRan, Schlumberger, and Alphabet during market pullbacks.
  • Highlights the potential in healthcare and industrials due to inflation and tech sector dominance; sees opportunity in copper for EV demand.
  • Advises caution with high-valuation tech stocks, suggesting diversification beyond dominant tech sector investments.

Market Overview

The stock market has been hitting record highs this year, primarily driven by major technology companies as investors anticipate increased profits from artificial intelligence. Despite this bullish trend, Sarat Sethi, portfolio manager of Douglas C. Lane & Associates, points out that there are still undervalued stocks that could perform well, especially during market pullbacks. Sethi highlights the impact of inflation on the Federal Reserve's monetary policy stance, emphasizing the need for investors to diversify their portfolios beyond the dominant tech sector.

Attractively Valued Stocks

Sethi recommends several attractively valued stocks for investors to consider, particularly during market dips. These include Johnson & Johnson, GlaxoSmithKline, Freeport-McMoRan, Schlumberger, and Google-parent Alphabet. These stocks have shown varying performances year-to-date, with potential for growth based on analyst price targets and current valuations.

Sector Opportunities

In the healthcare sector, Sethi identifies Johnson & Johnson and GSK as "very cheap stocks" with positive year-to-date performances. He also suggests looking into the industrials sector, specifically highlighting Freeport-McMoRan and Schlumberger as potential opportunities for investors. Sethi believes that the increasing demand for hybrid and electric vehicles will benefit Freeport-McMoRan due to its involvement in copper production, a crucial component in electrified technologies.

Tech Stock Insights

While major technology stocks have been driving the market, Sethi points out that Alphabet is currently trading at a discounted level, presenting a buying opportunity. Despite recent setbacks, including a 4% decline following Google's Gemini image generation product launch, analysts see potential for Alphabet's shares to climb significantly. Sethi advises caution when considering other high-valuation tech companies like Nvidia, Microsoft, and Meta, suggesting a diversified approach to investment strategies.

Street Views

  • Sarat Sethi, Douglas C. Lane & Associates (Neutral on the market):

    "The stock market may be ripping higher, but there are still some names trading at a discount that could do well... new data points to more rampant-than-expected inflation — which has put the Federal Reserve in a 'wait-and-see' position when it comes to monetary policy." "This market’s had a very concentrated run on GLP-1 and AI stocks, so we’ve seen some broadening but not really that much of broadening... Investors are looking to see if the rally is going to be continued by the big mega-caps or if it’s time for other sectors to start performing."