Veteran value investor Bill Nygren has warned that the popular benchmark S&P 500 index isn’t as diversified as it once was, and that he’s been picking cheap stocks outside the dominant technology sector. Nygren, a portfolio manager at Oakmark Funds for 40 years, said the technology sector has grown so strongly in the S&P 500 that the top 25 or so names make up about half of the investment. “It’s not as diversified as investors think,” Nygren said on CNBC’s “Money Movers” on Monday. “I think we’re going to see investors rethink the idea that the S&P 500 is some kind of low-risk way to invest in stocks.” The benchmark large-cap index has surged about 20% to consecutive record highs, buoyed by a handful of large-cap tech names like Nvidia and Meta Platforms. Many are seeing the breather as a sign of fragility in the bull market. Nygren said the negative bias toward value stocks has led him to look for companies with cheap shares and large buyback programs, so that the stock price rises on its own without other investors following suit. “It’s become very important for us to invest in companies that are taking matters into their own hands and using excess capital to buy back their own shares,” Nygren said. He highlighted Corebridge Financial in his portfolio, a $15 billion life insurance and retirement services company that was recently spun off from AIG. Corebridge is trading at about $28 a share, and Nygren expects the stock to reach a book value of $50 by the end of 2025, or four to five times earnings. The investor said the company could buy back 20% of its shares annually. “It’s a name that a lot of people don’t know,” Nygren said. “They don’t have to rely on other investors to recognize value. They just keep cutting back on flow.”
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Value investor Bill Nygren looks outside crowded tech giants
