It has been a mostly great year for investors playing the S&P 500, provided they owned a small group of tech stocks. But it's been a pretty ho-hum year for the rest of the index, which has been dominated by some big-name laggards.
Another view from Goldman Sachs (chart below): 15 of the biggest companies have driven 86% of the S&P 500's return year-to-date.
But non-tech companies haven't fared quite as well. CVS Health is down 26%, Moderna is off 34% and VF Corp is down 31%.
Will the rest of the S&P 500 finally draw more interest from investors in the second half of the year? Pros like Lerner and BMO's Brian Belski expect a modest broadening out of the market's rally as investors seek out bargains and bet on no rate hikes in 2024.
"The bogeyman of narrow market breadth has started to broaden out and is a trend we expect will continue," says Belski.
Here are three relative laggards from the S&P 500 this year that could gain favor on the Street.
BUY #1: AT&T
Year to Date Performance: -13%
AT&T (T) has had a challenging first half of the year as declining subscriber growth, softer-than-expected sales and disappointing free cash flow levels kept investors away from the telecom giant.
But despite those headwinds, David Sekera, chief US market strategist at Morningstar, told Yahoo Finance that AT&T is a top pick.
"AT&T is at the intersection of being a deep value play," Sekera said. "Fundamentally, it’s in a relatively strong position. We rate the company with a narrow economic moat, which means it has long-term structural cost advantages."
BUY #2: OCCIDENTAL PETROLEUM
Year to Date Performance: -8%
Occidental Petroleum (OXY), the Houston-based oil company backed by billionaire investor Warren Buffett, has surprisingly been left in the dust.
Shares are off more than 8% year to date amid lingering worries of softening oil demand against a backdrop of sluggish global economic growth. And the oil producer is not alone. The S&P 500's Energy Select Sector (XLE) is down 10% year to date following the sector's massive 57.6% gain last year.
Occidental’s largest shareholder, Buffett has protected the stock from the worst of this year's energy sector sell-off. He boosted his stake in the company to above 25% after buying 2.1 million more shares worth about $123 million.
"Back in 2019 they bought Anadarko – which means they own half the Permian Basin," Munson told Yahoo Finance Live. "The Permian is the crown jewel. It’s cheap to extract, and once you pump it all out you can frack it to draw blood from a stone – printing money… I love that they have cheap production."
BUY #3: CISCO
Year to Date Performance: +7%
A challenging macroeconomic environment has left Cisco (CSCO) shares far behind its tech peers and the broader S&P 500.
The stock's 7% gain so far this year pales in comparison to the Nasdaq 100 Index’s (^NDX) 36% surge. Investors have overlooked the maker of computer networking equipment amid concern clients are cutting back on IT spending. Orders declined 23% in its most recent quarter.
Trainer added: "The stock also boasts an attractive valuation that implies just 4% profit growth over the next decade. We think the company will do closer to 9% or 10% growth in profits."
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith.
