In this article we will take a look at the 10 best non-tech stocks to buy now.
Analysts and famous hedge fund managers are becoming unequivocal in their warnings that tech stocks are overpriced and inflating the already soaring valuations of the broader market, affirming the fears that we might be in a bubble. Billionaire David Einhorn of Greenglight Capital recently said in his letter to investors that tech stocks without strong fundamentals are in an “enormous bubble.” The billionaire believes the mania we saw in the tech IPO landscape in the midst of the pandemic, huge market caps, soaring valuations and rising speculative instruments all confirm his theory that we are in a bubble.
10 Best Non-Tech Stocks To Buy Now
The warning signs indicating the possibility that we could be in a bubble right now are plenty. Citigroup’s famous “panic/euphoria” index – metrics of the index include NYSE short interest ratio, margin debt, Nasdaq daily volume, composite average of Investors Intelligence and the American Association of Individual Investors bullishness data, the put/call ratio, the CRB futures index, gas prices, the ratio of price premiums in puts versus calls – currently reads its highest value on record.
Tech stocks are, however, starting to face signs of a correction. The NASDAQ slipped 3% on March 18, its biggest decline since February 25, as the yield on the benchmark 10-year Treasuries surpassed 1.75% and touched its 14-month high. Tech stocks belong to the category of growth stocks, whose value recede when yields rise as tech stocks imply earnings far from the future.
One of the most shocking examples of the current market euphoria is Hertz Global shares rising after the company filed for bankruptcy in 2020.
The Economist Intelligence Unit’s Cailin Birch said in a report that investors have started to expect that the Fed and the Congress will “keep coming to the rescue with ever more stimulus.” However, the analyst believes, these programs only help the Wall Street and have “no positive spillover for Main Street.”
“The risk of an asset bubble bursting has risen significantly,” Birch noted.
Amid the market noise, it’s become difficult to spot truly valuable and potentially profitable stocks. That’s why in this article we will focus on the non-tech sectors of the market and talk about 10 best non-tech stocks to buy now. These stocks have a PE ratio of less than 15, with revenue growing more than 10% over the last 12 months.
The rising volatility is causing the turbulence in the financial markets, hence the warnings of a bubble. Even the hedge funds are struggling to maintain their profits. The hedge fund industry’s reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context and industry outlook in mind, let’s start our list of 10 best non-tech stocks to buy now.
10. FS Bancorp, Inc. (NASDAQ: FSBW)
Number of Hedge Fund Holders: 4
PE Ratio: 7.94
FS Bancorp is one of the best non-tech stocks to buy now. The company operates 1st Security Bank of Washington. The company has 21 full-service branches and seven home loan production offices. The stock is up 140% over the last 12 months. The company in January increased its quarterly dividend by 24% to $0.26 per share.
As of the end of the fourth quarter, 4 hedge funds in Insider Monkey’s database of 887 funds held stakes in FSBW, compared to 5 funds in the third quarter. EJF Capital is the biggest stakeholder in the company, with 162,500 shares, worth $8.9 million.
9. Enstar Group Limited (NASDAQ: ESGR)
Number of Hedge Fund Holders: 11
PE Ratio: 3.34
Enstar ranks 9th in our list of 10 best non-tech stocks to buy now. The insurance group offers capital release solutions and specialty underwriting services. It segments include Non-Life Run-Off, Atrium and StarStone. The stock is up 115% over the last 12 months. Enstar is on the portfolio of Chinese billionaire Zhang Lei.
A total of 11 hedge funds tracked by Insider Monkey were bullish ESGR at the end of the fourth quarter, down from 13 funds a quarter earlier.
8. Hibbett Sports, Inc. (NASDAQ: HIBB)
Number of Hedge Fund Holders: 20
PE Ratio: 16.50
Alabama-based Hibbett Sports sells athletic footwear and sports apparel. The stock has gained 627% over the past 12 months. The company’s strength lies in its huge ecommerce presence. In the fourth quarter, the company’s comp sales jumped 21.9%, while ecommerce comparable sales increased by 44.8%. Digital sales account for 17.1% of the company’s total sales.
According to our database, the number of HIBB’s long hedge funds positions decreased at the end of the fourth quarter of 2020. There were 20 hedge funds that hold a position in Hibbett Sports compared to 21 funds in the third quarter. The biggest stakeholder of the company is Jim Simons’ Renaissance Technologies, with 529,192 shares, worth $24.4 million.
7. KB Home (NYSE: KBH)
Number of Hedge Fund Holders: 28
PE Ratio: 14.12
KB Home ranks 7th on the list of 10 best non-tech stocks to buy now. KBH is a home-building company that primarily serves the market of first-time home buyers. KB Home is listed in Fortune’s fastest-growing companies list. KB Home shares have gained 260% over the last 12 months. In February, Goldman Sachs analyst Susan Maklari upped KB Home to Buy from Sell, citing a strong backlog. Maklari upped KB Home price target to $51 from $32.
Fisher Asset Management is one of the 28 hedge funds tracked by Insider Monkey having stakes in KBH at the end of the fourth quarter. The fund owns over 2.8 million shares of the company.
6. The Michaels Companies, Inc. (NASDAQ:MIK)
Number of Hedge Fund Holders: 33
PE Ratio: 11.05
Ranking 6th on the list of best non-tech stocks to buy for 2021 and beyond is arts and décor firm The Michaels Companies, Inc. The company has over 1200 stores across North America. The stock has gained 1300% over the last 12 months. Earlier in March, the company said it has agreed to be acquired by Apollo Global Management, Inc. in a transaction that values Michaels at roughly $3.3 billion.
As of the end of the fourth quarter, there were 33 hedge funds in Insider Monkey’s database that held stakes in MIK, compared to 38 funds in the third quarter. Contrarius Investment Management, with 8.98 million shares of MIK, is the biggest stakeholder in the company.
In on of their investor letters, Bernzott Capital Advisors highlighted a few stocks and Michaels Companies Inc. (NASDAQ:MIK) is one of them. Here is what Bernzott Capital Advisors said:
“Michaels (MIK): After initiating a position in July 2017, we completed a re-underwriting of the company in December 2019 and concluded we made a mistake. MIK faces several structural challenges we did not forsee: lower margins due to increased competition and tariffs; management turnover, including the CEO, EVP Supply Chain and IT, and SVP Marketing; higher debt costs; and a major business model pivot switching customer focus from skilled enthusiasts to novices. The position was sold.”
5. Sempra Energy (NYSE: SRE)
Number of Hedge Fund Holders: 33
PE Ratio: 10.05
California-based Sempra Energy owns Southern California Gas Company (SoCalGas), San Diego Gas & Electric (SDG&E), Oncor Electric Delivery Company (Oncor), Sempra LNG and IEnova. The company has over $60 billion in total assets. In the fourth quarter, the company posted adjusted EPS of $1.90, above the Street estimates by $0.33. Revenue in the quarter jumped 7.8% to $3.17 billion, missing the consensus by $350 million. The company also affirmed its 2021 EPS guidance range of $7.50 to $8.10 and upped its dividend. Its dividend yield currently stands at 3.39%.
The company is also getting the attention of the smart money, as 33 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, up from 32 funds a quarter earlier.
4. Berry Global Group, Inc. (NYSE: BERY)
Number of Hedge Fund Holders: 34
PE Ratio: 12.28
Berry Global is a Fortune 500 company that makes packaging solutions, including plastic packaging, non-woven specialty materials, specialty films, adhesives, nonwovens, drink cups, containers and bottles. The stock is up 95% over the last 12 months. The company recently priced the private placement of $775 million of additional 1.57% First Priority Senior Secured Notes due January 15, 2026, with an expiry date of March 4.
With a $367.5 million stake in Berry Global, Eminence Capital owns 6.5 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 34 hedge funds held stakes in BERY as of the end of the fourth quarter, versus 43 funds in the third quarter.
Rhizome Partners, in their Q4 2020 investor letter, said that Berry Global Group, Inc. (NYSE: BERY) has a potentially good investment upside. Here is what Rhizome Partners has to say about Berry Global Group, Inc. in their Q4 2020 investor letter:
“Berry Global is the “Rodney Dangerfield” of value investments. The company recently issued $750mm worth of 2026 debt at 1.57% and used the proceeds to pay down higher coupon debt. The spread between the debt and equity yield is about 10%. Something is mispriced. In 2020, Berry had generated “bond-like” cashflows and had paid down almost $1 billion of debt. The market simply yawned. We keep hearing that institutional investors will not touch Berry until it reduces leverage below 4x EBITDA. Perhaps Berry will work like Griffin in that once they reduce leverage below 4x and starts to show 4-6 quarters of 2% organic growth, the shares may move “violently” to the upside.”
3. Fidelity National Financial, Inc. (NYSE: FNF)
Number of Hedge Fund Holders: 40
PE Ratio: 8.20
Fidelity National Financial ranks 3rd on the list of 10 best non-tech stocks to buy now. The company provides title insurance services for the real estate and mortgage industries. In the fourth quarter, the company posted adjusted EPS of $2.01, beating the Street estimates by $0.69. Revenue in the quarter jumped 60% to $3.77 billion, beating the Street forecasts by $810 million. Fidelity National Financial ranks 365 on the Fortune 500 list.
Windacre Partnership is one of the 40 hedge funds tracked by Insider Monkey having stakes in FNF at the end of the fourth quarter. The fund owns over 12.9 million shares of the company.
2. DICK’S Sporting Goods, Inc. (NYSE: DKS)
Number of Hedge Fund Holders: 42
PE Ratio: 13.51
Dick’s Sporting Goods has been on a tear in recent months. The stock has gained a whopping 360% over the last 12 months. Williams Trading recently started coverage of Dick’s Sporting Goods with a Buy rating, citing positive near and long term outlook. Earlier in March the company revealed its plans to launch an exclusive men’s athletic apparel brand called VRST.
According to our database, the number of DICK’S Sporting Goods’ long hedge funds positions increased at the end of the fourth quarter of 2020. There were 42 hedge funds that hold a position in DKS compared to 41 funds in the third quarter. The biggest stakeholder of the company is Atreides Management, with 1.7 million shares, worth $92.8 million.
In one of their investor letters, Brown Advisory highlighted a few stocks and Dick’s Sporting Goods Inc. (NYSE:DKS) is one of them. Here is what Brown Advisory said:
“Dick’s Sporting Goods reported first quarter earnings in which the company reported better-than-feared results driven by strong ecommerce sales growth that assisted in replacing lost brick and mortar sales as a result of store closures due to COVID-19. In addition to posting quarterly results that were better-than feared, Dick’s is viewed as a company that should be a long-term survivor that is poised to take market share in the sporting goods industry.”
1. Cardinal Health, Inc. (NYSE: CAH)
Number of Hedge Fund Holders: 49
PE Ratio: 12.40
Ranking 1st on the list of 10 best non-tech stocks to buy now is Cardinal Health. In addition to selling generic pharmaceutical, specialty pharmaceutical, over-the-counter healthcare and consumer products, Cardinal provides services to hospitals, ambulatory surgery centers, clinical laboratories and other healthcare providers. The stock is up 34% over the last 12 months. Baird recently gave bullish comments about Cardinal Health citing strong Q4 results. However, the firm said that this was the least positive quarter for the company when compared to its peers.
As of the end of the fourth quarter, there were 49 hedge funds in Insider Monkey’s database that held stakes in Cardinal Health Inc., compared to 45 funds in the third quarter. D. E. Shaw, with3.3 million shares of CAH, is the biggest stakeholder in the company.
You can also take a peek at Billionaire Jim Simons’ Top 10 Stock Picks and Billionaire Steve Cohen’s Top 10 Stock Picks.
Follow Insider Monkey on Twitter
Suggested articles:
- 15 Companies That Benefitted The Most From The Pandemic
- 15 Most Valuable African Companies
- 15 Most Reputable Companies In the World
Disclosure: None. 10 Best Non-Tech Stocks To Buy Now is originally published on Insider Monkey.
