The first half of 2026 will be a tough act to follow. In our 2026 full-year outlook, we were bullish on stocks, but we cautioned investors to dial back risk in their portfolios.

Right on cue, the broad market peaked on January 27, then sank more than 9%, a whisker below the 10% threshold that marks an official correction. But it’s the about-face from the market’s low at the end of March that has been truly stunning, with the S&P 500 Index taking just 11 trading days to set a new high — and subsequently notching six more by April 30, the date for prices, returns and other data in this story.

For context, consider that a pullback of that magnitude takes an average of 45 days to break even, according to financial research firm CFRA. "It’s funny," says Dan Phillips, chief investment officer at BMO Wealth Management. "People always say markets go down in an elevator [that is, quickly] and up on an escalator [more gradually]. This market is the exact reverse."

Another market adage says bull markets climb a wall of worry (and bear markets slide down a river of hope, goes the second part). This bull has plenty of worries to fuel its climb: Start with a war with Iran and an accompanying oil shock lifting Brent crude from about $71 a barrel to $114 recently, and gas prices in the U.S. from an average $2.98 a gallon to $4.30.

That in turn ignites fears of sticky inflation and other knock-on economic effects, including reduced spending by increasingly strapped consumers. Plus, unresolved worries from earlier this year linger, including the potential for artificial intelligence to upend the software industry and cut a wide swath through white-collar jobs, and whether the opaque private lending market is about to implode.

And yet, the bull marches on. The second half of the year presents a few sizable hurdles, including a changing of the guard at the Federal Reserve, the midterm elections and a historically weak period for stocks.

But investors who look beyond some choppy, volatile months and focus instead on the strong underpinnings of stellar corporate earnings and a resilient U.S. economy should be rewarded by the end of this year and into 2027, say the majority of market experts we’ve spoken to.

In our January outlook, we thought 7,500 was a realistic level for the S&P 500 at year-end. The median brokerage target is now a bit higher, according to S&P Global Market Intelligence, at a touch over 7,600. Let’s call it a roughly 5% price gain from the April 30 close of 7,209, or more than a 10% gain from the start of 2026.

Add in a dividend yield of just over 1.3%, and a total return approaching 12% for 2026 appears within reach.

Embrace uncertainty

You hear it all the time, says Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management: Expect volatility; there’s a lot of uncertainty.

"When do you ever hear, ‘It’s full of certainty out there’? Markets do better when there are high levels of uncertainty," he says. "Embrace the uncertainty!" Investors seem to have heeded his advice, taking the war, rising inflation and the potential downsides of AI in stride.

In fact, given the strength of the spring snapback, Slimmon is a bit worried that investors are on their way from complacent to euphoric, which is a bad sign for bull markets. "I think it would be healthy to have a new worry — the more they crop up, the more it pulls down speculation and extends the life span of the bull."

For now, despite recurring threats of a stalemate in the Iran war, economists and investors continue to look past it, expecting an imminent de-escalation, which would imply a relatively limited impact on the U.S. economy.

For example, of the economists surveyed in April by Blue Chip Economic Indicators, a monthly survey of economic forecasts, 87% recently lowered their 2026 outlook because of the surge in oil prices, with the April consensus forecast for overall gross domestic product (GDP) growth in 2026 coming in at 2.2%, down from expectations of 2.5% growth in March.

But most of the slowdown is slated to occur in the second and third quarters, and the economy could be largely back on track in the fourth quarter, with the economists expecting a growth rate of 2.0% by then. Kiplinger’s outlook is for 2.1% GDP growth for the year, the same as in 2025.

All eyes, of course, are on the price of oil, the locus of the economic and financial cost of the war. Assuming exports from the Gulf normalize in the next couple of months, commodity analysts at Goldman Sachs see Brent crude at $90 a barrel by the fourth quarter, and U.S.-based West Texas Intermediate oil at $83 a barrel.

"Full normalization of energy costs could take well into 2027 because of extensive damage to energy infrastructure in the Middle East," says Kiplinger economist David Payne.

Inflation expectations have increased apace. In March, the government's inflation report showed that consumer prices rose 0.9% month over month, led by a 10.9% increase in energy costs, including a 21.2% jump in gasoline — the largest monthly increase since the series was first published in 1967.

That pushed the year-over-year increase in inflation to 3.3%, up from 2.4% in February. Kiplinger expects an annual inflation rate of 3.0% at the end of 2026 — 4.0% if oil prices stay where they are.

Not your father's oil shock

Why then, given the havoc wreaked in the oil patch, has this market remained so resilient? "We’ve been here before," says BMO’s Phillips, "and the economy has managed through it." Oil hovered in the $100-per-barrel range for months following the Russian invasion of Ukraine, he notes, and from roughly 2011 to 2015, oil prices similar to today’s "were the norm, and we did just fine," he adds.

It’s not that surprising, then, that the stock market tends to shake off oil crises, with the S&P 500 returning an average 12% in the 12 months after an energy shock, going back to 1990 (see the table on the facing page).

Structural changes in the U.S. economy have helped, notes Jeff Schulze, head of economic and market strategy at ClearBridge Investments. First, the U.S. is far more energy independent, having become a net producer of energy rather than a net consumer.

Consumers, meanwhile, are less exposed to the cost of energy goods and services, which represented 3.9% of consumption in March, says Schulze, not far off record lows. "The overall wallet of consumers has gotten bigger while the share spent on energy has gotten smaller," he says.

And we’re far more energy-efficient. Compare the current economy to the one nearly two decades ago, when West Texas Intermediate crude first neared $100 per barrel — equivalent to more than $150 in today’s dollars. Since 2007, the amount of economic output per barrel of oil has increased tremendously, says Phillips.

Back then, we got about $8 to $10 of economic output for each dollar of oil. Today, we get almost $30. Look at it this way, he says: "In 2007, for every dollar of oil you could get a Value Meal at McDonald’s. Today, you could go to a pretty nice restaurant and get yourself a steak."

It’s also fortuitous that tax refunds are rolling out as gas prices have started to soar. By Phillips’s calculations, drivers will end up having paid $25 billion more at the pump in March and April combined. That could increase if gas prices continue to climb and as peak-driving season arrives.

But an expected $100 billion increase in tax refunds this year compared with last year provides an ample cushion. "With near-full employment and tax refunds, we believe the U.S. economy can see its way through recently elevated oil prices," he says.

A more important question is whether the Federal Reserve can see its way through higher energy costs. After three back-to-back quarter-point cuts in the Fed’s benchmark target interest rate in late 2025, the Fed’s April meeting marked the third straight pause on rates, with the federal funds target range holding at 3.50% to 3.75%.

In his last press conference as chair, Jerome Powell said the Fed was moving closer to a neutral position on rates, although for now it retains a bias toward easing. (Powell also said he would stay on as a Fed governor, and he reiterated concerns about the potential for continued legal attacks on the central bank’s independence.)

Before the Iran war, markets were expecting at least two 0.25 percentage point cuts this year and saw a significant chance of a third. More recently, the majority of traders were looking for no cuts this year, according to the CME’s FedWatch tracker, with less than 13% expecting a quarter-point cut by year-end and nearly 9% expecting a quarter-point hike.

Shannon Saccocia, Chief Investment Officer–Wealth at investment management firm Neuberger, sees things differently. "The basis for a hike is difficult to find," says Saccocia, who still expects two quarter-point cuts this year.

Although the new Fed chair, Kevin Warsh, has pointed to AI-driven productivity gains as a potential source of disinflation, monetary policy "will more likely hinge on whether higher energy costs begin to feed into other components of the consumption basket, which could complicate the path toward further easing," says Jason Pride, chief investment strategist at investment management firm Glenmede.

Triple threat

The transition to a new Fed chair is one of a trio of challenges for the market that also include the run-up to midterm elections and a seasonally weak period for the market, says Philip Orlando, chief market strategist at investment firm Federated Hermes. This year marks only the seventh time in 90 years when the three have occurred together, and that could result in a rocky summer, says Orlando.

Start with the new Fed chair. Looking at market performance going back to when Eugene Black took the helm in 1933 to when Powell took over in 2018, the pattern is the same. After a bit of a honeymoon, the market stumbles some three to six months into a new chair’s tenure, with the maximum pullback for the S&P 500 in the first six months a median 10%.

"Historically, there’s volatility surrounding the Fed chair, and this year that volatility will be on steroids," Orlando says.

The second challenge is the midterm elections — the run-up to which is typically marked by a spike in volatility as political rhetoric and policy uncertainty intensifies, spooking investors.

Going back to 1945, average S&P 500 price returns for the second and third quarters of midterm-election years have been a negative 2.6% and 0.8%, respectively, with four of the five months from May through September showing losses, according to CFRA.

The good news is that the 12 months following midterms are usually rewarding, with stocks returning more than 15% on average, according to data going back to 1990 from investment management firm Capital Group.

If the House flips to majority Democratic but the Senate remains in Republican control — as many pundits expect — it should be fine for investors. That configuration under a Republican president has delivered an average annual return of 13.7% dating back to 1933, according to Orlando — the second-best average on record. (A Democratic House and Senate with a Republican president is the worst, returning just 4.9%, on average.)

Finally, you’ve probably heard the old Wall Street saw, "Sell in May and go away." It stems from a seasonal market malaise that typically dampens returns from May through October. Compare the 2.1% average return for those months (since 1945) with the average 6.7% delivered from November through April.

What should investors do with this forecast of a summer squall? "Play defense now," says Orlando, with bargain-priced small-company and international stocks, the latter with a focus on emerging markets. They are likely to be more resilient in a pullback, he says.

"Then look for an opportunity to put money to work in late summer or early fall in growth and tech names." Whatever you do, don’t give up on the bull. Federated’s 2026 year-end target for the S&P 500 is 7,500; for 2027, it’s 8,200.

"Suppose I’m right," says Orlando. "We hit an air pocket and the market drops 10%, then bottoms in October — you could be looking at a 25% increase through December 2027," he says.

Earnings to the rescue

Bulls like Orlando are betting that a phenomenally strong corporate earnings picture wins the day — and the year, and the year after that. And they’ve got good reason: The first quarter has been a blockbuster, and analysts are revising earnings estimates higher for the future.

As of the end of April, first-quarter earnings growth for companies in the S&P 500 was set to top 27% compared with the first quarter of 2025, according to earnings tracker FactSet. That would mark the sixth straight quarter of double-digit, year-over-year earnings growth if the number holds when all reports are in.

"What’s remarkable," says market strategist Ed Yardeni, of Yardeni Research, "is that industry analysts continue to raise their S&P 500 earnings-per-share growth rates for all four quarters of this year. The gains are all in the double digits."

Analysts are looking for average earnings per share of $331 this year for S&P 500 companies, compared with $271 in 2025, up more than 20%; they estimate earnings of $379 per share in 2027.

It’s no surprise energy companies are expected to see the highest earnings growth this year, up nearly 45%, followed by — again no surprise — technology stocks, up 39%. The sector expected to see the least growth is real estate, where earnings are forecast to increase just 5.0% in 2026. But the breadth of earnings growth is encouraging: The share of S&P companies with positive growth estimates for the 12 months ahead could reach 90% over the rest of the year, says Yardeni.

Another bullish fundamental: Net profit margins — the percentage of sales turned into profits after expenses — were tracking at an average 14.7% for the first quarter as of the end of April, the highest level since FactSet started logging the metric in 2009 and well above the high of 13.2% set in the fourth quarter of 2025.

And S&P companies are expected to spin even more revenues into gold as the year progresses, according to FactSet.

Where to invest now

The U.S. is the best house on the investment block for the back half of 2026, with the large-company, growth-oriented stocks that have powered much of the bull market back in favor after a several-month hiatus — and yes, that means technology and AI leaders.

That sounds like a bit of a shift away from a preference for the value-focused small-company and international stocks that many strategists recommended before the war, but the latter remain potent portfolio diversifiers and still offer attractive return potential, so a balanced approach is best.

Within tech, it’s important to be selective, as a wide dispersion of recent returns represents renewed bullishness about the continuation of massive AI-related corporate capital spending, as well as an increasing worry about AI’s existential threat to other parts of the sector.

For the year to date through late April, for example, semiconductor equipment makers were up 63%; IT consultants and software-application providers were down 28% and 24%, respectively.

Our favorite tech fund is T. Rowe Price Global Technology (PRGTX), a member of the Kiplinger 25, the list of our favorite no-load mutual funds. A good choice for exchange-traded fund investors is Kiplinger ETF 20 member State Street Technology Select Sector SPDR (XLK).

Arista Networks (ANET), a technology hardware and equipment company, makes a Goldman Sachs list of long-term growth stocks that have notched at least 10% revenue growth in each of the prior two years, and are expected to do so in the current and next two years.

Eaton (ETN) is on Goldman’s list of stocks likely to benefit from spending on AI and on buttressing power infrastructure.

Value-focused stocks are a good foil for the high-octane portion of your portfolio. Consider Dodge & Cox Stock (DODGX), a longtime Kip 25 constituent. The fund’s biggest sector holdings at last report are healthcare and financial services.

Be careful about running headlong into oil stocks. The sector is a hedge against continued political upheaval, and some strategists recommend it. But it also carries significant risk, according to analysts at CFRA. They downgraded the sector in April, despite expectations of oil prices averaging $100 a barrel in 2026.

"Beware of the sugar high," they caution, in a sector that appears overvalued currently and vulnerable to downward earnings revision in 2027, when CFRA sees lower oil prices.

Small-capitalization stocks have been on a tear, with the Russell 2000 small-stock index outpacing the S&P 500 over the past 12 months, for the year to date and since the market bottomed on March 30.

Small and midsize companies should benefit from moderating wage growth — a big line item for them — and will see other cost savings as AI becomes more broadly adopted across the economy, says Schulze, at ClearBridge.

Funds we like include Kip 25 members Oberweis Small-Cap Opportunities (OBSOX), a growth-oriented fund, and T. Rowe Price Small-Cap Value (PRSVX), which tilts toward bargain-priced fare.

Outside the U.S., strategists have largely soured on most developed markets, particularly Europe, where economic growth expectations are fading. "They’ve been hit harder by this war," says Keith Lerner, chief investment officer at Truist Wealth. "They’re not insulated from the energy part of it."

Japan remains intriguing, though, as it reaps the benefit of recent shareholder-friendly reforms. Fidelity Japan (FJPNX) ranks in the top 5% of its category so far this year through April. If you want to take currency swings out of the equation, consider the iShares Currency Hedged MSCI Japan ETF (HEWJ).

Emerging markets are the favored international play currently for many portfolio strategists. EM stocks were outperforming U.S. stocks on a one-year and year-to-date basis before the war, and since the war started have remained resilient, down just 0.3%, as measured by the MSCI Emerging Markets index.

We like Kip 25 fund Baron Emerging Markets (BEXFX) for active management; iShares Core MSCI Emerging Markets (IEMG) is our low-cost, indexed ETF pick, with an expense ratio of just 0.09%.

Consider capitalizing on surprisingly good earnings with FullerThaler Behavioral Small-Cap Growth (FTXNX), available with no load or transaction fee at brokerage platforms including Schwab and Fidelity.

The fund looks for firms reporting large earnings surprises, seeking to profit from behavioral biases that can cause markets to under-react to positive new information. There should be plenty of fodder: FactSet reports that at the end of April, companies reporting earnings surprises were coming in an average 20.7% higher than what analysts expected — above the five- and 10-year averages of just over 7%.

Our advice for fixed-income investors at the moment is short — as in short term. Worries about stubborn inflation and a growing federal budget deficit could keep upward pressure on long-term rates, and rates and bond prices move in opposite directions.

You can’t go very wrong with Vanguard Short-Term Treasury Index (VGSH), an ETF with an effective duration (a measure of sensitivity to interest rate movements) of just 1.9 years, implying a roughly 1.9% loss in value if rates move up a percentage point. But pay attention to possible inflection points: As yields on 10-year T-notes crest 4.50%, says Truist’s Lerner, they might be worth a look.

Lastly, you might be inclined to jump into Treasury inflation-protected securities, but proceed with caution. TIPS can help you maintain purchasing power and diversify your portfolio, but longer-duration issues can react sharply to interest rate swings, which means you could be surprised by a decrease in value if rates move higher, even if inflation expectations are rising.

Stick with a low-duration option such as Vanguard Short-Term Inflation-Protected Securities Index (VTAPX).

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Like hemlines, investing styles go in and out of fashion. And for the better part of 15 years, value investing — the strategy of buying shares trading at a discount — has been out of vogue, significantly lagging an approach focused on fast-growing stocks trading at pricey valuations.

Late last year, however, a shift began. Bargain-priced stocks in the Russell 3000 Index gained a bit more than 6% over the past six months through the end of March, for example, trouncing the nearly 9% loss in the bogey's growth stocks over the same period. It's early days, of course.

"I'm hesitant to call a regime change for something that's only a couple of months old, but the magnitude of what we're seeing today is stunning," says Christian Heck, a value-oriented fund manager at First Eagle. "It's not a small outperformance. And it's something that is very different than what we've seen over the past five or 10 years."

In any case, you don't have to believe in a value comeback to view bargain-priced stocks favorably right now. The war in Iran has increased market rockiness, certainly, and thrown a splash of cold water on value's edge over growth shares.

But "volatility is a value investor's friend," says Heck, because it creates opportunity for bargain hunters to snap up shares in companies they admire that had previously been too pricey.

Moreover, buying stocks at low prices is one way to build some defense in your stock portfolio. Finally, just as frothy stock valuations can portend lower future returns, low stock valuations are often a good predictor of generous long-term gains.

Fire-sale prices on stocks

Cheap stocks are super-cheap now. At last report, the S&P 500 Pure Value Index — 100-odd stocks with the strongest value traits — boasted a price-to-earnings (P/E) ratio, based on estimated earnings, of 12. Its Pure Growth counterpart trades at a P/E of 24. That gap is "egregiously" wide, says Lewis Altfest, chief investment officer at Altfest Personal Wealth Management in New York City.

"It's value's turn," he says. "Things are changing now, at least for the time being, and investors should be taking some money out of growth stocks" and investing in value.

We'll point you toward some bargain-priced opportunities, including mutual funds, exchange-traded funds and stocks. Returns and data are through March 31, unless otherwise noted. But first, a primer on value.

Value is in the eye of the beholder

All value investors seek a discount, but there are many ways to define a bargain, whether that's measured by a stock's price in relation to earnings, sales, book value (assets minus liabilities), dividend or "enterprise value" — the value of a company if it were acquired today. At one end of the value spectrum are deep-value investors who target the cheapest stocks in the market.

"Often, they're contrarian investors who are looking for stocks that have fallen out of favor, but they have reasons to be more optimistic about them," says Robby Greengold, a principal member of the equity strategies team at investment research firm Morningstar. "They tend to employ some of the riskiest strategies in the value universe, because these stocks are controversial. The stocks could be cheap for a very good reason, and often the reason is there's a high-risk situation. They might even face bankruptcy," he adds.

At the other extreme is an approach that focuses first on finding good businesses and buying only if the shares trade at a significant discount — called "a margin of safety," says Heck — to what the business is worth. Often these investors are more willing to own some fast-growing companies that trade at price-to-earnings or price-to-sales multiples that are richer than those of traditional value stocks.

"They argue that the stocks are worth owning because the revenue and earnings growth rates justify higher-price multiples," says Greengold.

Value indexes typically tilt more toward certain sectors, such as materials, industrials, real estate, energy and utilities, while growth benchmarks favor tech and communications services. But these divisions aren't set in stone. The key to value investing is to home in on bargain prices.

"I'm a value investor, but that doesn't mean I can't own technology," says John Buckingham, editor of The Prudent Speculator.

Finally, although growth has trumped value for years now, it's worth noting that bargain-priced investors have still generated decent returns on an absolute basis. The typical large-company value fund, for instance, has returned 11% a year, on average, over the past decade.

"Is value back?" says Buckingham. "It hasn't really gone away."

How to invest in value stocks now

The easiest way to add a dollop of value stocks to your portfolio is to buy shares in a diversified mutual or exchange-traded fund. The Kiplinger 25, the list of our favorite actively managed no-load mutual funds, includes several good value-oriented strategies: Dodge & Cox Stock (DODGX), T. Rowe Price Small-Cap Value (PRSVX) and Dean Mid Cap Value (DALCX).

The Dodge & Cox managers are self-described contrarians. That kind of strategy can take a fair amount of patience, as the investment thesis for any given stock might take time to play out.

T. Rowe Price's manager, David Wagner, favors "unloved and under-followed" small companies. And Douglas Leach, Dean Mid Cap Value's manager, calls himself a "classic" value investor who favors high-quality companies trading at low prices for reasons that are temporary.

But there is a universe of other funds to consider. One is the iShares MSCI USA Value Factor ETF (VLUE). It has a good record of staying on a value track, according to Morningstar. It's pegged to an index of 150 undervalued stocks in large and midsize companies with solid earnings outlooks and low debt. Technology (38% of assets), financial services (11%) and communications services (10%) are its biggest sector exposures.

Notably, the fund has held up well since the start of the year, with a 4.4% return. That's better than 86% of its peers, as well as the 4.3% loss in the S&P 500. Over longer hauls, the fund stays well ahead of peers, too. And its 0.15% expense ratio is low. Cisco Systems (CSCO), General Motors (GM), Merck (MRK) and Bank of America (BAC) are among the top holdings.

The Vanguard Mega Cap Value ETF (MGV) stays focused on stable, large-company stocks, but it avoids an overconcentration in the Magnificent Seven stocks.

The exchange-traded fund tracks the largest companies by market value that score best on certain value traits, including stock price in relation to book value, sales, earnings (both estimated and historical) and other measures. Blue chip stocks JPMorgan Chase (JPM), Berkshire Hathaway (BRK.B), Exxon Mobil (XOM) and Johnson & Johnson (JNJ) are top holdings.

For a bigger tilt toward midsize companies, consider the Vanguard Value Index ETF (VTV) or its mutual fund share class, Vanguard Value Index (VVIAX). Nearly 30% of the stocks in the fund are mid-size companies; the rest are large companies.

Another fund worth considering is Fidelity Value (FDVLX). Matthew Friedman runs the midsize-value fund with two co-managers, trolling for the cheapest stocks of the highest-quality companies with increasing earnings and good free cash flow (money left after operating expenses and spending to maintain or upgrade property and equipment).

For instance, he acquired shares in Western Digital (WDC), a maker of data-storage devices, when it was cheap in late 2024. The stock has since climbed meteorically due to soaring demand for artificial-intelligence-related data storage and is now a top holding.

Over the past 12 months, Fidelity Value returned 21.5%, ahead of 88% of its midsize-value fund peers and beating the broad U.S. stock market. The fund trounces peers over longer hauls, too. "Some of my peers cheated" by adding growth stocks to their portfolio in recent years, Friedman says, "We don't do that. We invest in cheap stocks. We've been consistent about that."

Dividend strategies can be an effective way to focus on value, and they come with the added benefit of good yields. Among our favorites: Vanguard Equity Income (VEIPX), an actively managed mutual fund and member of the Kiplinger 25. The fund yields 2.2% and charges a 0.26% expense ratio — super-low for an actively managed fund. Since the start of this tumultuous year, Equity Income has gained 1.5%.

The Capital Group Dividend Value ETF (CGDV) is a member of the Kiplinger ETF 20 list of our favorite exchange-traded funds. A team of managers aims to invest in established, high-quality U.S. companies with above-average dividend yields. The fund, which yields 1.3%, boasts a 21.4% annualized three-year return that beat 98% of its large-value fund peers.

Individual stocks to buy

If you want to invest in individual stocks, start your search in areas of the market that have lagged. "The time to buy is when there's a lot of pessimism," says Buckingham.

Software stocks, for instance, have plummeted nearly 25% over the past six months over fears that AI will disrupt their subscription sales. That angst is overblown in some cases, says Angelo Zino, an analyst who leads the tech team at CFRA Research, who recently reiterated his Strong Buy' rating on Salesforce (CRM). (Salesforce is a member of the Kiplinger ESG 20, the list of our favorite stocks that are environmental, social or governance standouts.)

Financial stocks are the worst-performing sector over the past 12 months, as well as so far in 2026. The sector is taking a drubbing in part over concerns about private credit.

Another snag is the war in Iran. The conflict is a risk for all businesses, for sure, but war raises the potential for higher interest rates, higher inflation rates and an economic slowdown, all of which can impact bank profitability. That said, any good news there could propel these stocks up; bad news will be a drag. Step in cautiously, but we found a few to consider.

JPMorgan Chase typically trades at a premium P/E multiple relative to its peers. But shares have fallen 15% since they peaked in January, and the stock now trades at a P/E of 13, on par with its finance and investment banker peers, according to Zacks Investment Research. "That's a reasonable price for the best bank with a fortress balance sheet," says Buckingham.

Shares in the investment bank Morgan Stanley (MS) have slipped 15% from their 52-week high, too, and now trade at a P/E of 15. In the meantime, the stock sports a fat, 2.4% dividend yield.

Or invest in a financial-sector ETF or mutual fund. T. Rowe Price Financial Services (PRISX) and Fidelity Select Financials Portfolio (FIDSX) actively invest across the sector. The iShares U.S. Financials ETF (IYF) is an index-based ETF that invests in banks, insurers and credit card companies.

Healthcare stocks have been laggards, too, though lately they've been clawing their way back. Among the sector's worst performers: healthcare equipment and supplies. Enter Becton, Dickinson (BDX). Becton is a dominant maker of needles and syringes. These pieces don't cost much — a few cents, says Heck — and are mission-critical.

"Ninety percent of all people who enter any medical practice in the U.S. will get touched or pricked with a Becton product," he says. The stock trades at 13 times expected earnings, which is cheap relative to its 10-year median P/E of 20.

You can ratchet down the single-stock risk by investing instead in an ETF focused on the industry, such as the iShares U.S. Medical Devices (IHI). Or consider a fund that invests across the health care sector. Fidelity Select Health Care (FSPHX) is our favorite actively managed health care fund; State Street Health Care Select Sector SPDR (XLV) is our favorite healthcare ETF.

How the pros avoid a falling knife

One of the biggest risks in value investing is a falling knife — a Wall Street metaphor for a stock with a rapidly declining stock price. You buy a stock you think is cheap, but it falls further. "I would love to say that never happens," says Christian Heck, a value-oriented fund manager at First Eagle.

To protect against catching a falling knife or stumbling into a value trap — a stock that's cheap because it's actually a bad investment — Heck says he and his cohorts limit the size of their initial stake to just over 1% of fund assets. Then, they watch the stock for a bit. If its price falls further, they go back to their original investment thesis to figure out whether it still holds.

"If the stock's variables are tracking as we expected, we may add shares," says Heck. If not, they stay put.

Steph Guild, chief investment strategist at Robinhood Strategies, the advisory side of broker Robinhood, takes another tack. "I don't invest when a stock price is really down, because when something has downward momentum, sometimes it keeps going down," she says.

Instead, Guild waits for a shift in the stock's moving averages, a technical indicator that helps investors visualize stock-price trends. A moving average is the average of a stock's closing price over a set number of days, "moving" because with each new close, the oldest is dropped.

Guild focuses on three periods: 200 days, 50 days and 20 days. If shorter trend lines start to cross above the longer ones, it can indicate that a stock-price recovery is not merely in the works but "has legs," she says. "I'll wait until it starts to show some evidence of bottoming before I buy."

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Mastercard (MA) shareholders might not be too thrilled with the stock's more recent run, but few names have treated buy-and-hold investors to better returns over the long haul.

The world's second-largest payments processor has lost some of its luster over the past few years, but that's more to do with the legal and regulatory landscape than the company's operations. Threats to Mastercard's duopoly with Visa (V) are overblown, bulls say, and shares are priced for future outperformance for patient investors.

Buy-and-hold types who've been in the blue chip stock for ages can attest to Mastercard's strength. And while its competitive moat might not be quite as wide as it once was, the company's global brand remains as powerful as ever.

That's no small feat. A firm that was launched more than 50 years ago by a consortium of regional banks to compete with Visa today operates in more than 210 countries and territories. Nearly 40 million businesses accept Mastercard credit cards, of which there are 3 billion in circulation.

Payments processors aren't all that sexy, but Mastercard has indeed notched some nifty wins for capitalism. In the 1980s, the company issued the first international payment card in the People's Republic of China, as well as in what was then the Soviet Union.

Mastercard also has a history of innovation in security features, pioneering the now-standard practice of putting laser-etched holograms on cards. Later, it spearheaded the global rollout of the chip technology that today makes cards far more secure.

But investors were best served by the company's transition from a bank-owned cooperative to a publicly listed company in 2006. Anyone who invested in Mastercard during those early post-IPO days should have no problem paying off their purchases.

True, shares are lagging the S&P 500 by a wide margin over the past year or so. MA hasn't kept up with the broader market over the past half-decade either. Partly, that's a function of the way the tech sector — and all things related to artificial intelligence (AI) — have soared since ChatGPT debuted at the end of 2022.

MA is also contending with industrywide concerns. Persistent scrutiny of swipe fees has been a headwind for years. And now, the bipartisan Credit Card Competition Act of 2026 threatens Mastercard and Visa's lucrative duopoly. Calls to cap interest charges, while unworkable, are also spooking investors. (Shares in Visa have likewise underperformed the market for years now.)

You can see these anxieties playing out in Mastercard's valuation. Shares currently trade at less than 22 times estimated earnings. That's 20% lower than their five- and 10-year averages. A stock that once commanded hefty premiums thanks to its high operating margins (nearly 60%) and wide competitive moat has been repriced to reflect rising risks.

Interestingly, Berkshire Hathaway (BRK.B) sold its stakes in both Mastercard and Visa during the first quarter of 2026. The payments processors had been a couple of Warren Buffett's favorite stocks since 2011. Apparently, CEO Greg Abel, who is now calling the shots, sees things differently. Make of that what you will.

The bottom line on MA stock?

As noted above, Mastercard stock has been disappointing for more recent investors. Shares lag the broader market on an annualized total return basis (price change plus dividends) over the past one-, three- and five-year periods. Heck, over the past 52 weeks, MA stock is off about 4% vs a 30% gain for the S&P 500.

Beyond those recent periods, however, the returns have been priceless.

Over the past decade, MA stock leads the broader market by almost 3 percentage points. Over the past 15-year period, it beats the S&P 500 by more than 7 points.

Which brings us to what $1,000 invested in Mastercard stock 20 years ago would be worth today. Spoiler alert: a lot.

Have a look at the above chart and you'll see that a thousand bucks invested in MA stock two decades ago would today amount to almost $121,000. That's good for an annualized return of more than 27%.

By comparison, the same sum socked away in an S&P 500 index fund would be worth about $8,600 today – or 11.4% annualized.

That's remarkable outperformance. Happily for bulls, Wall Street analysts think Mastercard is priced to resume its winning ways.

"Solid quarterly earnings again underscored the resilience of MA's operating model amid a more mixed payments and macro backdrop," writes BofA Securities analyst Matthew O'Neill, who rates shares at Buy. "The underlying constant currency demand outlook remains intact, supporting confidence in Mastercard's long-term earnings durability and capital return profile."

O'Neill has plenty of company on the Street. Of the 39 analysts covering MA stock surveyed by S&P Global Market Intelligence, 29 rate it at Strong Buy, seven say Buy and three call it a Hold. That works out to a consensus recommendation of Strong Buy, with high conviction to boot.

More Stocks of the Past 20 Years

• If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Berkshire Hathaway Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have Today

Target (TGT) is one of the oldest and most iconic brands in American retail, but shares in the national discount chain have been a bad buy-and-hold bet for ages.

The big-box chain that came to define the concept of "cheap chic" traces its roots to a single family-owned department store in the early days of the 20th century. Six decades later, a rapidly expanding middle class in the midst of the baby boom drove consumer demand for one-stop shopping at value prices. It's no coincidence that Target shifted to a discount format at the same time that Walmart (WMT) and K-Mart entered the market.

A merger and decades of expansion set Target up to be the comparatively upscale alternative to Walmart during the heyday of big-box chains at the end of the 20th century. Whereas Walmart's slogan was "Always Low Prices, Always," Target led with "Expect More. Pay Less."

By the beginning of the 21st century, the Minneapolis-based chain was a certified national retail behemoth. And then things started to go wrong.

The onslaught of Amazon.com (AMZN) and other e-commerce companies took a toll on all brick-and-mortar retailers. Chronic underinvestment in its digital strategy caused Target to fall far behind Walmart in the rapidly growing channel. Today, Walmart is the second-largest U.S. e-commerce retailer after Amazon – albeit a distant second. Target, meanwhile, ranks fifth.

A massive data breach in 2013 that exposed the financial information of as many as 110 million Target customers certainly did the company no favors. Even worse was Target's abortive expansion into Canada. The foray, which lasted only two years, ended in 2015 with the company shuttering 133 stores and taking a $5.4 billion quarterly loss.

Target's product mix also makes it more sensitive to economic ups and downs. Where Walmart's and Costco's (COST) top lines benefit from consumer staples that tend to hold up better when consumer spending slows down, Target depends more on discretionary items. Food, toilet paper and diapers are more recession-proof than apparel and consumer electronics.

More recently, Target's margins have been hampered by shrink – the loss of inventory due to theft, damage or administrative error – and tariffs. A decade ago, the company enjoyed gross profit margins north of 27%, or more than two percentage points higher than they run today.

It should come as no surprise that a turbulent couple of decades haven't been great for TGT stock.

The bottom line on TGT stock?

True, Target is a dividend-raising machine. Equity income investors have seen their payouts rise annually for more than five decades. As a member of the S&P 500 Dividend Aristocrats, there's no doubt that TGT is one of the best dividend stocks for dependable dividend growth.

Sadly, a poor track record of price appreciation wipes out the benefit those dividends contributed to shareholders' total returns.

For its entire life as a publicly traded company, Target generated an annualized total return (price change plus dividends) of just 5.4%. That lags the S&P 500 by more than 5 percentage points.

And while the consumer staples stock is up 38% over the past 52 weeks – vs 31% for the broader market – every other standard time frame is a dud. Shares in TGT generated negative total returns over the past three- and five-year periods. As for the past 10- and 15-year periods, TGT lags the S&P 500 by wide margins.

Which brings us to what you'd have if you invested a grand in TGT stock a couple of decades ago.

Spoiler alert: not nearly enough.

Take a look at the chart above and you'll see that if you put $1,000 into TGT stock 20 years ago, it would be worth about $3,900 today. That's good for an annualized total return of 7%.

The same sum sitting in a low-cost S&P 500 index fund over the past two decades would be worth almost $8,000 today, or 10.8% annualized.

There's no way around it: Target has been a buy-and-hold bust for truly long-term investors.

As for where TGT stock goes over the next 12 months or so, Wall Street is very much split on the name. Of the 37 analysts covering the stock surveyed by S&P Global Market Intelligence, 9 call it a Strong Buy, two say Buy, 23 have it at Hold and three rate it at Sell. That works out to a consensus recommendation of Hold.

More Stocks of the Past 20 Years

• If You'd Put $1,000 Into Walmart Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Costco Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have Today

Warren Buffett, 95, the so-called Oracle of Omaha, is set to step down by year-end as CEO of investment company Berkshire Hathaway. Over 60 years, he and his deputy, Charlie Munger, who died in 2023 at the age of 99, produced outstanding investment returns that made other investors’ returns pale in comparison.

Look at the numbers: From 1965, the year Buffett took over a struggling textile company, through the end of 2024, Berkshire’s shares rose 5,502,284%. That’s an annual compounded return of 19.9%. Over the same six decades, the S&P 500 index rose just 39,054% or 10.4% annually.

“Buffett is the most legendary investor in the history of investing,” says Adam Patti, CEO of exchange-traded fund company VistaShares. “And he has changed the way people invest.”

Now the question is which investor will take over as king or queen of investing. Whoever that will be will have some large boots to fill.

The long view

Long before taking over Berkshire Hathaway, Buffett was learning. His investing journey began early. He purchased his first stock at the age of 11, buying three preferred shares of Cities Service, a utility and oil company, and making a profit of around 5%. (Note: A basic element of Buffett’s investing strategy is to buy and hold, as he says, “forever.” Cities Service eventually became part of Occidental Petroleum, of which Berkshire is the largest shareholder.)

Years later, after studying at Columbia University under the legendary Benjamin Graham, who pioneered the concept of “value investing,” and earning a master’s degree, Buffett created the Buffett Partnership investment firm in 1956. Nine years later, Buffett went on to lead Berkshire Hathaway with the intent of converting it into a diversified holding company. Munger joined up in 1978. They ditched the textiles business in 1985 to focus on buying well-run businesses and taking big stakes in public companies.

The magic of Buffett and Munger's investment philosophy was simple in theory. “The best way to summarize what Buffett did, was to be patient and be prudent,” says Cathy Seifert, an equity analyst at research company CFRA. “Those two attributes served him well, and they weren’t so radical.”

That long-term view differed from many investors who looked for short-term gains, much like a professional market trader. Patti dubs it “rapid fire trading.” While that might work for Wall Street pros, it tends to be a losing strategy for amateurs.

When Berkshire bought controlling interests in companies, it did so with the radical idea of keeping the founders and other existing managers, Seifert says. Corporate takeovers typically involve firing top management and replacing them with executives from outside the company.

Plenty of cash

Berkshire has also benefited from holding insurance companies that generate massive cash flows each year, allowing it to buy more stock holdings, Seifert says.

Famously, Buffett would only buy companies that he understood. He passed on those that he didn’t understand. In line with a cautious approach, he famously said, “Buy when there is blood in the streets.” The idea is to purchase shares at low prices and avoid paying more than the underlying value of any investment.

Although Buffett plans to remain as chairman of Berkshire’s board, by the end of this month, Greg Abel, 63, a Canadian who has a background in the energy business, is expected to take over as CEO and the running of the company. It’s unknown how, or if, Abel will change Berkshire’s investment strategy.

New faces coming up

But a bigger question may be who will be the pretenders to the Wall Street throne as the record-breaking Wall Street investor?

The names that pop up are those who have forged their career and steeled their resilience in the financial markets. The following Wall Street veterans look like probable contenders.

Bill Ackman, known as an activist investor who founded Pershing Square Capital Management. In the last decade, Pershing’s total return was 153% or almost 10% annually, according to Stockcircle.

David Tepper is famous for running a hedge fund and is an expert on distressed debt. Returns of the last 10 years totaled approximately 225% or 12.5% a year, according to Stockcircle.

Ray Dalio founded Bridgewater Associates in 1975. His skill is not in doubt, but the annualized returns of the Bridgewater Associates Portfolio over the last 10 years have been modest, at around 5.4%, according to Stockcircle.

Daniel Loeb, a well-known investing activist and founder of Third Point Management, is also a successful hedge fund manager. Annualized returns of the last decade through 2024 were 5.2%, according to data from Third Point Investors.

Cathy Wood is famous for taking big bets in her Ark Invest tech-focused portfolio and promoting her investing philosophy on TV. The ARK ETF produced annualized total returns of 17.8% over the last decade, according to Morningstar data.

However, George Soros may take the cake for investing if he can be persuaded to do so. He’s the founder of the Quantum Fund and still advises it. The fund returned annual gains of 30% a year between 1970 and 2000, including a 1992 windfall when Soros famously shorted the British pound.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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Most kitchens are well-stocked with pantry staples, the foundation of all recipes. But every good chef knows that the best meals feature a variety of flavors, including some spice. Technique is important: Too much or too little of any single ingredient can make a big difference.

The same approach applies to portfolios. Earlier this year, many U.S. investors learned that their mix was off after foreign stocks significantly outpaced U.S. shares … just as the S&P 500 stumbled badly. It quickly became clear that many investors were underexposed to foreign markets and overexposed to the United States.

In a June survey, Schwab Asset Management found that moderate-risk individual investors held just 10% of their portfolios in foreign shares; U.S. stocks, by contrast, made up 61%. In short, investor portfolios weren't diversified.

It was a comeuppance long in the making. For nearly 15 years, U.S. stocks have been the place to be. Why bother to diversify — break up your investments across a variety of stocks, bonds and other assets — when the S&P 500 is beating everything?

"It can be easy to forget the benefits of diversification in a very sharp upward-moving market," says Andrew Altfest, a certified financial planner with Altfest Personal Wealth Management in New York City.

But over time, you'll find that a mix of investments can smooth your returns, strengthen your resolve as an investor, dampen risk in your portfolio and keep you exposed to whichever corner of the market is working at the moment — no crystal ball necessary.

In a truly diversified portfolio, some investments will be in favor while others are on the outs. "You will never own only winners, but you won't get stuck with only the laggards, either," says Jeff DeMaso, editor of The Independent Vanguard Adviser.

A smoother ride

A diversified portfolio can deliver less-volatile returns, which may help you stay the course during turbulent times — and arguably, that's half the battle in achieving your investment goals.

Moderate-allocation funds, also called balanced funds because they stabilize a 60% allocation of assets to stocks with a 40% stake in bonds, have been about one-third less volatile than an all-stock portfolio over the past 10 years.

"When the stock market sells off, investors tend to sell and move into cash. The problem there is, they've divested. So, we always say, stay invested and diversify," says Alessio de Longis, senior portfolio manager and head of asset allocation at Invesco Solutions.

Indeed, diversification isn't a strategy you turn on during rough markets and switch off in roaring bull markets. "It's something you should always have in your portfolio,” says Kristy Akullian, head of iShares investment strategy for the Americas at BlackRock.

Diversification can help ward against risk, too, of which there's no shortage these days. U.S. stocks are trading at high valuations. The economy looks to be slowing. Inflation remains sticky. And uncertainty lingers about the impact of new government policies and geopolitical risks. All of these challenges are chipping away at investor confidence.

Some advisers zero in on risks as a guiding principle for diversifying their clients' portfolios. Worried about a decline in the dollar? Add non-dollar assets — foreign stocks or bonds — to your portfolio. Concerned about an inflationary shock? Fold in a stake in commodities or real estate. A recession? Insert a slug of high-quality bonds or beef up on cash.

"Since I think all of these are potential sources of risk to the stock market, I put a lot of these diversified eggs into my clients' portfolio baskets," says Paul Winter, a certified financial planner at Five Seasons Financial Planning in Salt Lake City, Utah.

Another reason to diversify is that it's impossible to predict which investment will outperform in any given year — so it pays to own a mix of several. "The point of diversification is that you don't know what is going to happen," says Thomas Martin, of Globalt Investments, an Atlanta-based investment firm, but you can be prepared just the same.

The fact is, market leadership can shift dramatically from year to year. Though large-company stocks have topped the charts in many years recently, the winning asset class in any given year is often anybody's guess.

According to the Callan Periodic Table of Investment Returns, a colorful depiction of how asset returns can vary from year to year, small-cap stocks fared best in 2020. In 2018 and 2022, cash prevailed. And emerging markets stocks were the best-performing asset class in 2017; the next calendar year, they were the worst.

While there are rules of thumb to follow, a well-diversified portfolio is "very much an art, not a science," says Winter. For example, you want to own multiple kinds of assets, but that does not mean you own everything in equal measure. "Depending on your overall allocation, you might not need to go super-deep on every category," says Roger Young, a CFP at T. Rowe Price.

The good news: This is a great time to diversify. If, like many American investors, your portfolio is heavily weighted toward U.S. stocks, it's not too late to lighten the load and find opportunities in less-expensive pockets of the market.

"U.S. stocks are near their all-time highs, and that's a lot better time to diversify than, say, back in March 2009," the market's nadir during the Global Financial Crisis, says Winter.

Stocks, bonds and alternative assets are the main elements of a diversified portfolio. But you'll want to make sure you're diversified within those types of investments, too.

In this article, we'll walk you through the ingredients of a good diversification plan, with some timely moves to make now and tips on how to maintain your portfolio. Prices, returns and other data are as of August 31.

Stocks

Stocks can be risky but also rewarding. Over the past 10 years, the S&P 500, which represents more than 80% of the total U.S. stock market, has returned a whopping 15% a year.

But the stock market doesn't move as a monolith — and within your stock holdings, you should assemble a broad mix, considering a number of factors.

Company size

The market can favor companies of a particular size — sometimes for years — depending on economic factors, industry innovations or even just market sentiment.

Over the past decade, thanks to globalization, large companies have ruled, ranking as the top-performing asset class in five of the past 10 years and among the top three performers in eight of the past 10, according to the Callan table.

"The big just got bigger," says Jake Schurmeier, a portfolio manager at Harbor Capital. That makes exchange-traded funds (ETFs) that invest in small and midsize companies, such as the iShares Core S&P Mid-Cap (IJH) and the iShares Core S&P Small-Cap (IJR) — members of the Kip ETF 20, our favorite exchange-traded funds — good diversifiers for the large-cap S&P 500.

Some strategists see an opportunity in midsize-company stocks, especially these days. The middle tier of the U.S. stock market "is uniquely positioned to capitalize on growing demand for American-made goods and infrastructure solutions in a reshoring and energy-independent economic landscape," says Dina Ting, head of global index portfolio management at Franklin Templeton.

Plus, on a price-to-earnings basis, mid-cap stocks now trade at an atypical discount to large caps.

Concentration

Large-company stocks' recent run has included the meteoric rise of tech stocks in general and anything related to artificial intelligence (AI) in particular.

A group that includes Nvidia (NVDA), Microsoft (MSFT) and Apple (AAPL), known as the Magnificent Seven, accounts for one-third of the value of the S&P 500 Index. Thus, what might look like a diversified collection of U.S. stocks is in reality an outsize bet on a dazzling few.

A simple way to mitigate such overconcentration is the Invesco S&P 500 Equal Weight ETF (RSP). In this fund, every company gets an equal share of assets. So, while Nvidia accounts for 8% of the traditional market-cap-weighted index, it makes up just 0.24% of the Equal Weight fund.

Investment style

Professional investors typically hew to a certain methodology. These approaches break down into two broad styles: value and growth. Value managers favor stocks that trade at a discount to various metrics; growth managers prefer companies that are growing faster than average.

The two styles wax and wane at different times, and the cycles tend to last for long stretches. Value won the period from the start of 2000 to 2009. But since then, growth has dominated, though it's worth noting that value stocks held up better during the most recent bear market from January to October 2022.

Because it's difficult to predict when one style is going to outperform the other, even in a bear market, it's important to maintain a toehold in both growth and value strategies.

Chances are, however, that you've got plenty of exposure to growth stocks these days. Consider adding a value-driven fund such as Dodge & Cox Stock (DODGX), a mutual fund that has outpaced the S&P 500 over the past five years, or Capital Group Dividend Value (CGDV), an ETF that has beaten the S&P 500 over the past three years.

Both are actively managed, but index-fund lovers could look at the Vanguard S&P 500 Value ETF (VOOV). The ETF holds its own among a peer group of value-oriented large-company stock funds.

Geography

You need both U.S. and non-U.S. stocks in your portfolio, although many years of U.S. out-performance made that idea unpalatable. That changed in 2025: After lagging the U.S. stock market for nine of the past 11 calendar years, the MSCI EAFE Index, a popular international-stock benchmark, is up nearly 23% so far this year, beating the S&P 500 by more than 12 percentage points.

Most strategists agree that U.S. investors need to boost their exposure to international stocks. The timing is good. A weakening dollar tends to magnify gains in foreign shares (because they translate into more dollars stateside). And foreign stocks are still cheap relative to U.S. stocks on a price-to-earnings basis, even after a strong run so far this year.

Foreign stocks include those in both developed and emerging markets. You can zoom in on a region — Europe, Asia, Latin America, say — or a single country, such as Japan, India, Germany or China. And of course, at every level, you can focus on company size or value or growth approaches.

Start with the Vanguard Total International Stock ETF (VXUS). It's an inexpensive way to get instant exposure to nearly every foreign stock in developed and emerging markets. Morningstar analyst Zachary Evens calls it "wall-to-wall foreign-stock exposure." The fund has gained 23% since the start of the year.

Add an emerging-markets index fund. The iShares Core MSCI Emerging Markets ETF (IEMG) tracks an index of 20-odd developing markets. "A weaker dollar is good for EM stocks," says Richard Cook, a portfolio manager of Cook & Bynum fund. A recent rebound in Chinese stocks — 27% of the index — has helped the fund return 18% over the past 12 months.

Baron Emerging Markets (BEXFX) — a member of the Kiplinger 25, our favorite no-load mutual funds — is actively managed, growth focused, and has gained 19% over the same period.

These days, many strategists, including T. Rowe Price's Charles Shriver, see opportunity in small, foreign companies. They typically trade at a premium to their larger brethren, but not now. And "small-cap international stocks will benefit from domestic economic growth in home countries and are less sensitive to tariffs," he says.

We have our eyes on the Avantis International Small Cap Equity ETF (AVDS) and the Dimensional International Small Cap Value ETF (DISV). The Avantis fund invests in a mix of growth and value small companies, with a focus on valuation and profitability. Over the past 12 months, it has gained 23%. The Dimensional exchange-traded fund focuses on bargain-priced small stocks in developed countries and has returned 25% over the past 12 months.

Bonds

Bonds provide ballast to the stock side of any portfolio, generally speaking, because when stocks fall, bond values tend to rise. That didn't happen in 2022, when a precipitous rise in interest rates pushed both stocks and bonds down (bond prices and yields move in opposite directions). The S&P 500 fell 18%, and the Bloomberg U.S. Aggregate Bond index sank 13%.

It was the worst year ever for bonds, but a few fixed-income sectors held up better. Bank-loan funds, for instance, lost 2% on average; short-term bond funds dipped just 5%. Ergo, in 2022, a diversified bond portfolio would have outperformed the Agg index.

Broadly speaking, there are four major bond sectors: government, corporate, securitized debt (bundled IOUs such as mortgages or auto loans, say, that are sold as a single security), and municipal bonds, which pay income that's exempt from federal and sometimes state taxes.

A diversified bond portfolio will include a mix of sectors. The Agg index, for instance, is diversified as far as sectors go: Government bonds make up just less than half of the index, corporate and securitized debt combined are another 50%, and the rest sits in cash and muni IOUs. But there are more layers of bond diversification to consider.

Credit quality

Credit ratings reflect a borrower's financial ability to repay debts. The higher the rating, the more creditworthy the issuer is, and vice versa. That's why investment-grade bonds, rated between triple-A and triple-B, are considered high quality — there's little risk of default. Debt rated between double-B and triple-C is often called junk or high yield — there's a higher risk of default, and therefore yields are higher to attract investors.

Bond portfolios should hold mostly high-quality debt at their core. The Vanguard Total Bond Market ETF (BND) and the iShares Core U.S. Aggregate Bond ETF (AGG) are the biggest index-based high-quality bond ETFs. But we prefer active strategies, such as Baird Aggregate Bond (BAGSX) and Dodge & Cox Income (DODIX). Both mutual funds are members of the Kiplinger 25.

Then consider adding lower-quality debt, which can boost the overall yield of a bond portfolio. In late August, for instance, U.S. high-yield corporate debt yielded 6.7%, and bank loans, issued by companies with low credit ratings, yielded 8.6%.

Our favorite high-yield corporate fund, Vanguard High-Yield Corporate (VWEHX), favors higher-quality, double-B junk bonds. But with economic uncertainty ahead, we're partial these days to short-term high-yield bond funds such as the Pimco 0-5 Year High Yield Corporate Bond Index ETF (HYS). Its short-term focus can help dampen default risk, a concern if the economy slows.

Duration and maturity

Investors often confuse duration, a measure of a bond's sensitivity to interest rate moves, with maturity, the length of time a bond will pay interest before it repays the principal. They're not the same, but they are connected.

Maturity plays a part in the calculation of duration. The longer the maturity, the longer the duration and the more sensitive a security is to interest rate shifts.

The typical long-term government bond fund, for example, has an average maturity of 20 years and a 16-year duration. That implies if rates were to rise by one percentage point, the net asset value of long-term government funds would decline 16%, and vice versa. Short-term government bonds have an average maturity of three years and a duration of 2.6 years.

Generally, low-duration bonds are a defensive bet when interest rates are rising, and high-duration bonds stand to benefit most when rates fall. These days, however, even though cuts in short-term rates are on the docket, a fall in long-term rates isn’t guaranteed, says Akullian, the iShares strategist. That's why she favors intermediate-maturity bonds for now.

The iShares 3-7 Year Treasury Bond ETF (IEI) sports a 4.3-year duration. Since the start of the year, it has returned more than 5%. The actively managed Vanguard Intermediate-Term Bond ETF (BIV) favors bonds with maturities of five to 10 years and has a duration of 6.1 years. Its portfolio holds government and corporate debt of medium maturities. So far this year, it has gained 6.4%.

Finally, the Fidelity Investment Grade Securities ETF (FSEC) holds mostly triple-A-rated securitized debt and has a duration of 5.5 years. Its return so far this year is 5.3%.

Geography

For much of the 2010s, foreign bonds sported negative yields. "That's a hard sell," says Schurmeier, the Harbor Capital portfolio manager. But now, foreign bonds offer positive yields, as well as a potential return boost from a weakening dollar. The Vanguard Total International Bond ETF (BNDX) holds high-quality, foreign corporate and government bonds.

Emerging-markets debt offers fatter yields, but these IOUs tend to be more volatile, too, so buyer beware. Our favorite emerging-markets bond fund, Vanguard Emerging Markets Bond (VEMBX), invests in dollar-denominated debt, which becomes easier for developing countries to repay as the dollar weakens.

Alternatives

This catch-all category includes nontraditional strategies that seek to hedge stock and bond market returns, or at least to generate returns that don't move in lockstep with them.

Alternative strategies might focus on gold, commodities, cryptocurrencies, or the debt or equity of private companies. They might employ techniques to limit losses in a downturn but crimp bull market gains. Others balance bets on undervalued stocks by short-selling overpriced names.

"Many alternative strategies weren't even a thing 10 years ago, but they are today," says Winter, the Salt Lake City CFP.

Consider carving out a small slice from the bond side of your portfolio to devote to alternative assets — no more than 5% to 10% of your overall portfolio, says de Longis. One approach to choosing an alternative strategy is to figure out what kind of risk you're trying to hedge against, such as those listed below, and invest accordingly.

Inflation

To hedge inflation, for instance, beyond the protection the stock side of your portfolio may offer, consider commodities. These funds proved their mettle in 2022, returning 16%, on average.

The First Trust Global Tactical Commodity Strategy Fund (FTGC) has outperformed its peers in four of the past five calendar years, with below-average volatility. Neuberger Berman Commodity Strategy ETF (NBCM) boasts above-average returns with below-average volatility, and its expense ratio is below average, too.

Instability

To ward against uncertainty, consider gold. "Gold is a safety net for chaos," says Schurmeier. Trade-war fears have fueled 29% gains in the iShares Gold Trust Micro (IAUM) and the SPDR Gold MiniShares Trust (GLDM, $68, 0.10%) so far this year.

Volatility

To smooth out your returns, consider one of a new breed of ETFs called defined-outcome funds.

One we're eying is the Innovator Defined Wealth Shield ETF (BALT). Using options, the fund provides a 20% buffer on losses in the S&P 500 every three months in exchange for a cap on gains. You can hold the ETF indefinitely. The 20% buffer and cap on gains resets quarterly, in January, April, July and October. The cap set in early July was 2.2% after expenses. Over the past three years, Defined Wealth Shield has returned 7% annualized with less volatility than the Agg index.

Bear in mind that diversified portfolios, in contrast to Tolstoy's happy families, are not all alike. As always, everything depends on your time horizon and your risk tolerance.

"If you're relatively young and are primarily invested in stocks, you might want to make sure your diversification is robust on the stock side, but on the bond side, your small piece in bonds could be a straightforward U.S. investment-grade type of bond fund portfolio," says T. Rowe Price's Young. Similarly, those who are nearing retirement or already retired will want to pay special attention to some inflation hedges.

Over time, your portfolio will need some fine-tuning. Some tweaks are related to age or life stage, says Christine Benz, director of personal finance and retirement planning for Morningstar.

At age 50, for instance, you'll want to de-risk your portfolio a bit around the edges. Tilt toward high-quality, large-company stocks over small-cap fare, for instance. Or favor dividend payers. By your late fifties or early sixties, start shoring up your portfolio with safer assets. On the bond side, for instance, lean into high-quality short and intermediate-term bonds and build up your cash position.

Other adjustments may be tactical, such as investing more in large and midsize companies than in small firms if a recession looms, or favoring short-term bonds over long-maturity debt when interest rates are climbing. Keep the tactical moves to no more than five to 10 percentage points up or down from your overall portfolio targets, says Invesco's de Longis. Any bigger, and you risk derailing your asset-allocation plan.

Finally, review your portfolio asset mix and rebalance, if necessary, once a year. "The more diversified your portfolio, the greater the potential benefits of rebalancing," says Winter. Just don't go overboard. Think of your portfolio like a bar of soap, suggests Benz: "The more you touch it, the smaller it's going to get."

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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The stock market has surged since early April to a solid gain for 2025, so it may come as a surprise to learn that since the start of the year, more than one-third of the components of the S&P 500 Index have declined — 79 of them by at least 10%.

Some of the biggest losers are attractive. I still have worries about the effects of the new tariff regime on the global economy and the U.S. market, but if you are looking for long-term purchases — as you should — this is the time to examine stocks that the market shuns.

My intention is to show how to separate good buys from value traps (that is, stocks that deserve to be cheap).

Let's begin with UnitedHealth Group (UNH). It's down 49.8% so far this year (through July 31, the date for prices, returns and other data here, unless otherwise noted).

Its woes are many, including the assassination of Brian Thompson, CEO of its UnitedHealthcare unit, which elicited a shocking wave of support for the alleged killer.

Polls found that most Americans blame United's thirst for profits, at least in part, for Thompson's death. More recently, the company announced it was facing a Justice Department criminal and civil investigation for its billing practices.

Many Americans may think United is making too much, but Wall Street thinks it's making too little. The company's Medicare Advantage business has been a disaster because elderly members are going to the doctor more than expected.

Costs are rising in other parts of the health insurer's business as well. In July, United cut its earnings projection for 2025 by half from the January forecast.

Investors are wise to ask: Is the reason for United's problems endemic to the business or the result of mistakes that can be corrected and challenges that can be overcome?

The firms that insure their members against health costs are widely despised, and it's possible that Congress and the White House will seek remedies that will further harm the sector. But politics is part of running any large business in the U.S. today, and United has navigated these shoals before.

A share price that has dropped is the worst reason to sell a stock — or to overlook it if it becomes historically cheap. A decline in share price is a signal that something may be wrong, but errors can be corrected.

More alarming is a fundamental change in the business — increased competition, rising costs that can't be passed on to customers, a decline in a firm's reputation. These are real risks in United's case, but I believe they are outweighed by positives. One of those is that United could benefit from consolidation, with the entire sector suffering and smaller firms in danger.

Deservedly down

Dow Inc. (DOW), by contrast, is down 38.5% and deserves to be. The venerable chemical company is losing money and has cut its dividend.

I'll admit I don’t like commodity stocks anyway; I prefer to bet on brains, not things. But Dow has other problems that are unlikely to go away: Chinese dumping on the one hand, and tariffs on raw materials on the other.

Tariffs are hurting several other big-loser stocks. One is Lululemon Athletica (LULU), a company I have liked since it traded at $40 a decade ago. It broke $500 at the end of 2023, but it recently went for $201 — down 47.6% this year alone.

Half the company's production facilities are in China and Vietnam, but higher duties aren't the only problem. Lulu is getting real competition in the athleisure sector now from Alo Yoga, Vuori and Gap's Athleta.

Analysts expect profits to decline a bit this year but rise 8% next. That might happen, but the challenges are serious. I see risks and benefits as roughly even, so I'm no longer a fan.

United is different. Even in a worst-case scenario this year, the company's profits will have more than quadrupled since 2010. The dividend rose in 2025, for the 16th year in a row, and it appears to be protected for the future. The stock now yields 3.5%.

Value Line reports that for the past 10 years, UnitedHealth's earnings have risen at a 16.5% annual average — an unsustainable rate for practically any company. For the next five years, the forecast is for half that rate, which is still decent. That's one reason Value Line, which rarely succumbs to enthusiasm, says, "We see a long-term buying opportunity."

There are others. Gartner Group (IT), a research and advisory firm with over $6 billion in annual revenues, has dropped 30.1% this year, mainly because the Trump administration has been canceling consulting contracts.

But the concern may be overdone; federal funds represent only 4% of the company's revenues, said CEO Gene Hall on an earnings call. As a services firm, Gartner is largely immune from tariffs.

Another enticing services company that won't be burdened by tariffs is Salesforce (CRM), down 22.5% this year. The tech stock is trading about where it was five years ago, even though profits have risen by half.

Its cloud and artificial intelligence businesses keep growing, and Value Line estimates that the purveyor of customer-relationship software’s earnings will rise at an average of 14% annually for the next five years.

Who can resist chips?

The packaged-foods sector has taken a big hit this year, both because of weakening demand from higher prices and the prospect of a more aggressive Food and Drug Administration.

Shares of General Mills (GIS) and Conagra (CAG) have had serious losses, but I am particularly drawn to The Campbell's Company (CPB), which has fallen 21.0% this year.

Campbell's owns not only the iconic soup brand but also Pepperidge Farm, Swanson, Goldfish, Snyder's pretzels and Cape Cod potato chips.

Earnings have hit a plateau, and investors are frustrated. But the consumer staples stock is cheaper than it was in 2012, and it yields as much as a 30-year Treasury (4.9%). At a market capitalization (price times shares outstanding) of $9.5 billion, it’s also acquisition bait.

Speaking of icons … it is hard to ignore some of the world's best businesses on the Big Losers of 2025 list: Merck (MRK), the pharmaceutical giant, trading at a forward price-earnings ratio of 9; Apple (AAPL), which looks like it will escape a major tariff threat; and Chipotle Mexican Grill (CMG), with a disappointing quarter that has hardly justified a year-to-date drop of 28.9%.

Be clear that I am not advocating bottom-fishing — or buying shares just because they are cheap. Companies such as UnitedHealth Group and Campbell's have shown that they can be profitable in tough environments.

Other stocks have been gliding blithely along on a wave of relief that destructive trade wars haven't materialized, but it makes more sense to search for proven companies that have been disdained, ignored or viewed with deeper pessimism than warranted.

James K. Glassman chairs Glassman Advisory, a public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. He owns none of the stocks mentioned here. You can reach him at JKGlassman@gmail.com.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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When a CEO is in his nineties, you'd think investors wouldn't be caught off guard when he says it's time to hang it up. But Mr. Market seems to be displeased by Warren Buffett's announcement in May that he would hand over the reins at Berkshire Hathaway (BRK.B) at the end of 2025. (Buffett, who turned 95 on August 30, will remain as chairman.)

Since that day, Berkshire's "B" shares have fallen 12.6% — even as the broader market notched new highs, with the S&P 500 Index returning 11.8%. (Prices and returns are as of July 31, unless otherwise noted.)

You may be wondering if there's an alternative to a post-Buffett Berkshire. A few Berkshire Hathaway clones are on the market — firms with insurance at their core and portfolios of businesses and stocks built for long-term returns. Some funds either explicitly or implicitly follow the Warren Buffett way.

We looked at some of the options below. Fair warning: Replacing Buffett may be as difficult for your portfolio as it is for Berkshire.

Very little of the Berkshire transition was a surprise. Buffett has had stock-picking help for some time from Berkshire execs Ted Weschler and Todd Combs.

And Greg Abel, the man Buffett tapped as the next CEO, was first named a potential successor in January 2018. But Abel built his career as an energy executive, not a portfolio builder.

That seems to have spooked Buffett acolytes, who wonder whether Berkshire's magical long-run returns — a compounded 19.9% from 1965 through 2024 — can continue.

"Buffett is able to take his huge balance sheets and turn $1 into $2," says Vitaliy Katsenelson, a money manager and author of The Intellectual Investor. "I don't know how good Greg Abel is."

That sums up the uncertainty. But Buffett boosters suggest shareholders should remain patient.

Christopher Bloomstran, a St. Louis–based money manager, does not believe the stalled stock price "has anything to do with the likelihood that Greg is not going to do a bang-up job. I think he will. I think he's absolutely phenomenal."

Buffett's Canadian counterpart

Though Abel was born in Alberta, the man widely called "the Canadian Warren Buffett" is 75-year-old Prem Watsa, who founded insurer Fairfax Financial (FRFHF) in 1985 and serves as its chairman and CEO.

The stock trades over the counter in the U.S., and on the Toronto Stock Exchange (FFH), accessible via some brokers, including Fidelity, Interactive Brokers and Schwab. In either case, charges may apply.

With a $39 billion market value, Watsa's company has developed a similar — albeit smaller — following to Berkshire's. The Fairfax annual meeting is a multiday affair that attracts value-oriented investors from Canada and other countries.

A fan blog, the Corner of Berkshire & Fairfax, is dedicated to value investing forums and discussion of the similarities between the two companies.

Fairfax's results suggest why: The company's book value per share increased an average 18.7% per year from 1985 to 2024, while the share price increased at an annualized rate of 19.2%.

Watsa may be even more of a bargain hunter than Berkshire, and that has occasionally led to picking losers. Fairfax's portfolio has muddled along for years with a large position in BlackBerry (BB), the mobile-phone pioneer that has struggled to reinvent itself.

Fairfax has had some winners recently, though. A large position in Canadian steelmaker Stelco paid off handsomely when Cleveland-Cliffs (CLF) bought the company in 2024. Fairfax's one-third stake in Greece's Eurobank increased in value from $2.3 billion at the end of 2023 to $3.2 billion on March 31.

Stephen Boland, an analyst at brokerage Raymond James, says Fairfax is one of the most diversified insurers, both in the number of countries in which it operates and in the lines of insurance it sells.

The company is "still exposed to California wildfires — it took a big loss for that in 2024 — but it has tended to diversify the business really, really well on the insurance side," says Boland, who recommends the shares.

With what he believes was a "stellar" second quarter for the company's investment portfolio, the stock is his top pick in the Canadian insurance sector. It trades at about 10 times earnings for the year ahead, according to S&P Global Market Intelligence.

Berkshire Hathaway's insurance operations largely target consumers — its Geico subsidiary causes some analysts to categorize Berkshire as an auto insurer.

Markel (MKL), by contrast, is a "specialty insurer," with sophisticated customers. It sells products such as collectible-car insurance, liability policies for corporate boards of directors, and insurance against damage to offshore oil rigs.

Like Fairfax, Markel has encouraged comparisons to Berkshire. For 35 years, the company, headquartered in Virginia, has held a brunch in Omaha on the weekend of the big Buffett bash. More than 2,500 people reportedly attended the 2025 event.

Over the past 38 years, the company's share price has increased at an annualized rate of roughly 15%.

Berkshire stock is the single largest holding in Markel's portfolio, accounting for $1.7 billion worth of assets on March 31 — three times the size of the second-largest position. Alphabet (GOOGL), Brookfield (BN), Deere (DE) and Amazon.com (AMZN) round out the top five, with each position worth about $400 million to $500 million.

Markel's portfolio of stocks, like Berkshire's, accounts for a heavier proportion of assets than for most insurers, which tend to focus on bonds. A separate division, Markel Ventures, holds 100% ownership in 20 companies, many of which are manufacturers.

Analysts say they like Markel in the long run, but a recent spike in the shares, coupled with underwhelming insurance results, has cooled them on its near-term performance.

Activist investor Jana Partners disclosed in December 2024 it had taken a stake in Markel and wanted the company to spin off its ventures unit so that it would be a more attractive takeover target for a conventional insurer.

The Jana news boosted Markel's stock price, and it trades at about 20 times earnings for the year ahead, according to S&P. Just one of seven analysts who cover Markel rate it a Buy.

Given depressed profits, "I think they're trading kind of where they should be now," says analyst Robert Farnam, of investment firm Janney, who has a Hold rating on the shares.

But the stock may have appeal for investors who buy on dips or who have a long enough time horizon. "I consider Markel to be a terrific long-term investment," says Farnam. "This is the type of stock that you basically put into retirement accounts and forget about."

Loews (L) has an insurance company at its core and owns multiple businesses, including hotels and an energy pipeline company, so it, too, has drawn comparisons to Berkshire. But in many ways, Loews is more of a family conglomerate.

Benjamin Tisch, named CEO this year, is the third generation of his family to run the company, a component of the S&P 500, and members of the Tisch family own roughly 20% of the stock.

"Even though Loews is in the 500, there's low investor interest" because of the Tisches' outsize stake, says Catherine Seifert, an analyst with CFRA who stopped covering the company more than two years ago. "And they're not as diversified as Berkshire anyway. Honestly, if you want to replicate Berkshire, you're probably better off doing it with a series of exchange-traded funds."

Following Buffett's path

There are a handful of ETFs that explicitly follow Berkshire; but with the Buffett premium seemingly dissipating at Berkshire, you might be better off looking for other funds that incorporate Buffett-esque investing principles, such those focused on companies that enjoy wide "moats," says Aniket Ullal, head of ETF research and analytics at CFRA.

When Buffett explains his desire to invest in businesses with a long-term competitive advantage, he has long used the word moat, as in a waterway that surrounded castles of the Middle Ages.

A moat keeps potential competitors away from your business — in economic terms, it's called a barrier to entry. Berkshire's wholly owned subsidiary BNSF Railway, for example, has a moat: Only four major railroad companies remain in the U.S., and the probability that a new one will try to lay thousands of miles of track to compete is nearly zero.

The largest and oldest moat ETF is the VanEck Morningstar Wide Moat ETF (MOAT), which tracks the Morningstar Wide Moat Focus Index. The 52 companies in the index as of May 31 were the cheapest of what Morningstar considers wide-moat stocks, based on their discount to the research firm's estimate of their fair value.

The ETF's top three holdings at last report were Estée Lauder (EL), military shipbuilder Huntington Ingalls Industries (HII) and Allegion (ALLE), an industrial security firm.

Compared with similar funds, the portfolio is overweight in health care and consumer staples stocks and has less invested in consumer discretionary and financial services names, according to Morningstar.

In a market that has seen years of exuberance for high-growth names, however, the fund's philosophy has had a mixed track record. It returned 7.5% over the past 12 months, compared with 16.3% for the S&P 500.

Four times in the past decade, it has been in the top 6% of its fund category (U.S. large-company stocks with a blend of growth and value characteristics). But it had a poor 2024, ranking in the bottom 5%. The fund's expense ratio is 0.47%.

Another approach is to zero in on funds that focus on metrics that typically point to the kind of high-quality companies that Buffett favors.

We prefer the JPMorgan U.S. Quality Factor ETF (JQUA), a member of the Kiplinger ETF 20, the list of our favorite exchange-traded funds. The fund tracks an index that sifts for companies that meet 10 criteria, including measures of profitability such as strong earnings and cash flow; financial risk (low debt, high interest coverage, low share-price volatility); and earnings quality (consistent accounting practices).

It has returned 13.6% over the past 12 months, and its 0.12% expense ratio makes it one of the cheapest funds of its kind. Top sectors are technology, financial services and consumer discretionary stocks. Nvidia (NVDA) was the fund's top holding at last report. Berkshire Hathaway places in the fund's top 10.

Then again, perhaps you should follow Buffett's own investment advice for individual investors. In 1994, he told shareholders that by "periodically investing in an index fund, a know-nothing investor can actually outperform most investment professionals."

At Berkshire's 2020 annual meeting, he elaborated: "In my view, for most people, the best thing to do is to own the S&P 500 index fund. People will try to sell you other things because there's more money in it if they do." He has specifically suggested the low-cost Vanguard S&P 500 ETF (VOO), with an expense ratio of 0.03%.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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The Federal Reserve will keep short-term interest rates unchanged when it concludes its next meeting, experts say, as solid economic growth, moderating inflation and a "low-hire, low-fire" labor market support current policy.

Of more interest is how Fed Chair Jerome Powell handles the press conference following the release of the central bank's policy statement. The Fed's independence has come under question, and Powell is set to preside over just two more meetings before his term as Fed chief ends on May 15. While Powell could remain on the Fed board for the remainder of his full term, he could also choose to step aside entirely.

As for the state of the economy, fourth-quarter gross domestic product (GDP) is tracking at a strong growth rate of 5.4%, according to the Federal Reserve Bank of Atlanta's GDPNow model.

Meanwhile, the jobs market remains sluggish but steady. As for inflation, while it's still above the Fed's long-term target, recent readings have come in better than expected. Fears of a tariff-driven surge have thus far proven unfounded.

Matthew Luzzetti, chief U.S. economist at Deutsche Bank, suggests Powell’s press conference could veer into "non-economic issues," such as current threats to the Fed's independence. On the "fundamental" side, Luzzetti expects Powell to describe policy as "well positioned," as it is plausible to argue that rates are currently neutral.

"Powell might also sound somewhat more sanguine on the labor market, while still emphasizing downside risks," Luzzetti adds.

As of this writing, market participants expect the Fed's rate-setting committee, the Federal Open Market Committee (FOMC), to stand pat on the federal funds rate.

Indeed, as of January 26, interest rate traders assigned a 97% probability to the FOMC keeping the target rate steady at 3.5% to 3.75%, according to CME Group's FedWatch.

With the Fed set to leave rates unchanged at an increasingly complex time, we turned to economists, strategists and other experts for their thoughts on monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.

Fed rate decision: what the experts say

"After three straight rate cuts last year, the Federal Reserve is widely expected to keep interest rates unchanged at the next meeting. We may see another dissent (in favor of an additional cut) from Governor Miran before his term ends on January 31, but the real focus will be on Chair Powell's press conference. Investors want to know whether this will simply be a one-meeting 'pause' or the beginning of a longer hold. Right now, the economy still looks surprisingly sturdy." – Larry Adam, chief investment officer at Raymond James

"We expect the Fed to hold rates steady and present a somewhat more upbeat view about the economy through the policy statement and Chair Powell's press conference. The statement is likely to upgrade the growth assessment to 'solid,' note tentative evidence that unemployment has stabilized, and hint at an improving balance of risks to the outlook." – Matthew Luzzetti, chief U.S. economist at Deutsche Bank

"Markets are now not really expecting a Fed rate cut until June, or the first meeting after Jay Powell has left the Chair. We remain a bit more dovish than the market, expecting three quarter-point trims this year. True, real GDP growth expectations are being lifted, but it's coming from better productivity, and the job market remains sluggish while core inflation is stable to lower." – Douglas Porter, chief economist at BMO Capital Markets

"We don't expect to learn a lot at the January FOMC meeting. The Fed is on hold but remains data dependent. The balance of risks around the two mandates hasn't changed much since December. Chair Powell's press conference might be dominated by questions about politics rather than policy. On the latter, however, market pricing creates risks of a dovish surprise." – Aditya Bhave, U.S. economist at BofA Securities

"We expect no policy change in the January meeting. Our base case anticipates 25 to 50 bps of additional easing this year, moving towards neutral and generally supporting our constructive economic and market outlook." – Lauren Goodwin, chief market strategist at New York Life Investments

"While no change in interest rates is expected, markets will be highly attentive to the tone of the statement and Chair Powell's press conference. Any adjustment in how the Fed characterises inflation, labour market conditions or downside risks to growth could quickly influence rate-cut expectations. A message that reinforces patience and acknowledges cooling momentum would likely support equities and pressure the dollar, while a more cautious or hawkish tilt could revive volatility across risk assets." – Daniela Hathorn, senior market analyst at Capital.com

"We expect the Federal Reserve to hold rates steady at the January FOMC meeting, following three consecutive rate cuts in 2025, as policymakers take time to assess the impact of past easing. Assuming inflation continues to trend lower and growth remains resilient, we see room for moderate rate cuts in 2026." – Gargi Chaudhuri, chief investment and portfolio strategist at BlackRock

"The FOMC is widely expected to leave the fed funds rate unchanged at its January meeting. We expect the post meeting statement and press conference to signal maximum flexibility as the Committee strives to keep its options open. Our forecast remains for two 25 bps rate cuts at the March and June meetings, but the risks to our forecast look increasingly skewed toward later and possibly less easing this year." – Sarah House, senior economist at Wells Fargo

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Berkshire Hathaway (BRK.B) is in a class by itself when it comes to really long-term outperformance. It's not for nothing that Warren Buffett, who will retire as CEO at the end of 2025, is known as the greatest long-term investor of all time.

BRK.B stock has been a market beater over the past 20 years, too, but all the millionaires Berkshire minted had skin in the game long before the turn of the century.

That's how compounding and the law of large numbers work.

But first, a quick recap of Berkshire Hathaway's history. The company was a struggling textile firm when Buffett took control in 1965. Over the ensuing years, Buffett converted it into a holding company, or a company that buys other companies.

Buffett's first target was an insurance company, and the insurance business continues to be at the core of Berkshire's operations today.

Insurance was especially attractive to Buffett because of float, or the money insurance companies hold between collecting premiums and paying out claims. Thanks to the float from Berkshire's insurance companies, Buffett had ample sources of capital to buy up or invest in other enterprises.

Today, Berkshire Hathaway comprises more than 60 wholly owned subsidiaries, including BNSF Railway, Geico insurance, industrial titan Precision Castparts and fast food chain Dairy Queen.

Meanwhile, the Berkshire Hathaway equity portfolio, with a market value of about $250 billion, includes major stakes in Apple (AAPL), Bank of America (BAC) and American Express (AXP), to name just a few.

Berkshire Hathaway has always been a long-term bet on the dynamism of the U.S. economy. It's also a low-beta stock, which means it tends to underperform in up markets and outperform in down markets.

And what that has added up to over the past 60 years is nothing less than astonishing. Since 1965, Berkshire stock has generated a compound annual growth rate of almost 20% vs 10% for the S&P 500.

What does that look like on a brokerage statement? Well, if you put $1,000 into Berkshire stock 60 years ago, it would be worth about $33 million today. The same sum invested in the S&P 500 would today be worth about $336,000.

Warren Buffett and his late partner Charlie Munger really did mint many a millionaire over the course of their long careers.

However, BRK.B's returns over the past 20 years, while good, have naturally been more modest.

After all, there's nothing like getting in on the ground floor.

The bottom line on Berkshire stock?

Although BRK.B stock outperformed the broader market by a wide margin over the past five years, it actually lagged the returns of the S&P 500 over the past one-, three-, 10- and 15-year periods.

If you go back 20 years, BRK.B, which doesn't pay a dividend, generated an annualized return of 11.2%.

That's not too shabby, but it leads the S&P 500, with dividends reinvested, by less than a percentage point. An active fund manager might be happy with such results, but it hardly means BRK.B stock was a path to riches in the 21st century.

Have a look at the above chart to get a sense of what BRK.B's returns would mean to your brokerage statement over the past couple of decades. They're just OK.

Indeed, if you put $1,000 into Berkshire stock 20 years ago, today it would be worth about $8,300. The same amount invested in the S&P 500 would theoretically be worth about $8,200 today.

With Warren Buffett set to step down at the end of 2025, some folks fear that Berkshire stock's best days are behind it. The reality is that Berkshire is now so big that it's unreasonable to expect anyone to repeat Buffett's historic run.

True, that doesn't mean BRK.B can't continue to be a market beater going forward. Wall Street is mostly bullish on the name, giving it a consensus recommendation of Buy, according to data from S&P Global Market Intelligence.

Nevertheless, BRK.B's era of generating truly outstanding returns would appear to be behind it – and that was true even before Buffett announced his retirement.

More Stocks of the Past 20 Years

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Procter & Gamble (PG) is about as blue as a blue chip stock can be. Sadly for long-term shareholders, this battleship of a defensive dividend-paying name has delivered underwhelming returns vs the broader market for a very long time.

Founded in the first half of the 19th century, P&G has grown into the world's largest consumer products company by market value, boasting a vast portfolio of billion-dollar brands. From Tide laundry detergent to Crest toothpaste to Pampers diapers, today, P&G sells its wares in more than 150 countries.

Yet even as Procter & Gamble expanded its dominance in the U.S. and spread around the globe, it never wavered in its commitment to returning cash to shareholders through dividends. P&G has paid uninterrupted dividends since 1891.

Even more impressively, P&G has increased its payout every year for nearly seven decades. As a member of the S&P 500 Dividend Aristocrats, Procter & Gamble has more than earned its reputation as one of the best dividend stocks to buy for dependable dividend growth.

Between its dividend increases and the fundamental nature of its business — sales of toothpaste and diapers tend to hold up in tough times — P&G stock is considered a classic defensive name.

This Buy-rated Dow Jones stock has been a component of the blue-chip benchmark since 1932.

There's no questioning the company's illustrious history. P&G stock's past performance, however, isn't quite as distinguished.

The bottom line on PG stock?

There's no way around it: P&G stock has been a market laggard for ages.

To be fair, over its lifetime as a publicly traded company, P&G has delivered market-matching results. With a total return (price change plus dividends) of 10.8%, it's essentially tied with the S&P 500 over the same span.

The problem is that if you look at time frames more relevant to shareholders alive today, Procter & Gamble stock is a bust.

It lags the broader market on an annualized total return basis in the past one-, three-, five-, 10-, 15- and 20-year periods – and by painfully wide margins, too.

To get a sense of what this underperformance looks like on a brokerage statement, have a look at the above chart. It shows that if you put $1,000 into P&G stock 20 years ago, it would today be worth about $4,400. That's an annualized return of 7.8%.

The same thousand bucks invested in the S&P 500 would today be worth about $8,000 — or an annualized return of 10.9%.

Past performance is not a guarantee of future results, and Wall Street does mostly like P&G stock at current levels. Of the 24 analysts covering P&G surveyed by S&P Global Market Intelligence, 10 call it a Strong Buy, four rate it at Buy and 10 say Hold. That works out to a consensus recommendation of Buy — albeit with somewhat mixed conviction.

Speaking for the bulls, Argus Research analyst Taylor Conrad recommends buying shares on weakness.

"Despite higher raw material and distribution costs, the company continues to manage its margins with productivity initiatives," Conrad writes in a note to clients. "We also like P&G’s record of dividend growth and note that management’s 5% dividend hike in April showed confidence in future performance."

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Dividend growth continues to slow amid uncertainty over U.S. trade policy. Happily, income investors can still count on select S&P 500 stocks to deliver sizable and reliable hikes to their payouts.

U.S. dividend payers collectively raised their payouts by $14 billion in the third quarter, according to the latest data from S&P Dow Jones Indices. While that represents a 43% increase vs Q2, on a year-over-year basis, dividend hikes fell by 0.7%.

A look at dividend growth for the 12 months ending September 2025 is even more dispiriting, with increases falling 23% on a comparable basis.

"Dividend growth continued to be slow in Q3 2025, as concern over forward cash commitment was inhabited by the uncertainty over the evolving tariff polices," writes Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Although companies continue to raise their dividends, they are doing so with smaller increases, Silverblatt says, reflecting caution over the impact of tariffs on sales, costs and the general economy.

If there's a bright side to the latest figures, it's that Q3 dividend cuts fell by 25% vs the year-ago period. And for the 12 months ending in September, dividend decreases plunged by more than 36% vs the same period last year.

Long-term income investors know the importance of rising dividends. Shares in companies that raise their dividend payouts like clockwork decade after decade can produce superior total returns (price change plus dividends) over the long run, even if they sport apparently ho-hum yields to begin with.

That's partly because regular dividend increases lift the yield on an investor's original cost basis. Stick around long enough, and the modest yield you received on your initial investment can hit double digits one day.

The S&P 500 Dividend Aristocrats, which are among the best dividend stocks to buy for reliable dividend growth, are a good place to start if you're interested in sussing out such dividend stalwarts. But that doesn't mean you can't find other index components bucking the trend of slower dividend growth. These three stocks are great examples of that.

Stocks with fast-rising dividend payouts

For example, in the more economically sensitive consumer discretionary sector, Royal Caribbean Group (RCL) in September hiked its quarterly dividend by a hefty 33% to $1 from 75 cents per share.

The global cruise ship operator resumed paying quarterly dividends in the third quarter of 2024 – thanks to the ongoing post-pandemic recovery – and has been hiking them ever since.

"We expect bookings to increase and prices to rise, driven by pent-up demand and an affluent clientele," writes Argus Research analyst John Staszak, who rates the consumer discretionary stock at Buy. "We also anticipate fewer cancellations as the cruise industry continues to recover and consumers opt for experiences over products."

The analyst adds that management's efforts to increase total returns should boost RCL's 2026 annual dividend to $4.25 a share, up from a prior forecast of $2.60.

In the really big leagues, there's Microsoft (MSFT). MSFT stock has been killing it on the price charts for ages, but the tech giant also does very well by shareholders when it comes to returning cash through dividends.

In September, Microsoft increased its quarterly payout by 10% to 91 cents per share. The dividend is payable on December 11 to shareholders of record on November 20, which is also the ex-dividend date.

Anyone who put $1,000 into Microsoft stock 20 years ago would be thrilled with the results today. And while its price appreciation has been outstanding, the income component of MSFT stock has been a massive contributor to total returns too.

Have a look at the chart below and you'll see that over the past two decades, MSFT gained 1,780% on a price basis alone. Add in the dividends, and MSFT's total return comes to a whopping 2,600%.

For context, the S&P 500 gained 718%, including dividends, over the same span.

Lastly, in the category of sin stocks, Philip Morris International (PMI) continues to be a reliable dividend grower. The tobacco company in September raised its quarterly dividend by 8.9% to $1.47 per share.

Mature companies with steady free cash flow are often a good place to look for equity income, and PMI has been no exception. The company has increased its annual dividend every year since 2008 – good for a compound annual growth rate of 7.1%.

S&P's Silverblatt notes that current tax and write-off benefits from the 'One Big Beautiful Bill' have added to corporate earnings. That bodes well for more dividend hikes, at least in the shorter term.

"Working with a base case for a higher-level resolution of economic related issues, lower interest rates, and continued U.S. consumer and equity support, Q4 dividends appear in place to set to a new quarterly record," Silverblatt says.

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Analysts have been busy updating their discounted cash flow models and price targets for Nvidia (NVDA) after the most important AI company in the world failed to give the sort of blow-out revenue guidance Wall Street has come to expect.

Indeed, shares in NVDA, the world's second most valuable publicly traded company with a market cap in excess of $3 trillion, actually stumbled after posting Q3 results.

But then these sorts of things can happen when a stock is said to be priced for perfection.

Either way, it seemed like a good time to take a look at a few of the ways in which analysts' expectations have changed for NVDA stock in light of the company's latest guidance.

First, let's have a look at NVDA's price target. Although these targets are of limited utility, they do form the basis for declaring whether a stock is a Buy, Hold or Sell.

As of now, NVDA's average price target stands at about $170, up roughly 6% from the pre-earnings release target of about $160, according to data from S&P Global Market Intelligence.

NVDA's new average price target gives shares implied upside of about 20% over the next 12 months. The old price target – based off NVDA's previous level – gave the stock implied upside of about 13%.

It's hard to believe Nvidia has become a $3 trillion company because of its potential for 13% or 20% price upside over the next year or so. Heck, the stock nearly tripled over the past 52 weeks.

Price targets. Go figure.

Perhaps relative valuation can be more helpful.

Nvidia is cheap, relatively speaking

First, a caveat about valuation. While absolutely critical, valuation tends to play out on its own time frame. This time frame can be much longer than investors expect. Keep this in mind when looking at Nvidia, as the stock usually looks expensive and yet it keeps going up.

That said, NVDA's relative valuation does look increasingly compelling by some measures these days.

For one thing, while it's true that Nvidia changes hands at nearly 35 times analysts' average next-12-months earnings per share (EPS) estimate, this multiple represents a 20% discount to its own five-year average, according to data from LSEG Stock Reports Plus.

Perhaps more importantly, after updating their models, analysts' average long-term growth forecast now stands at more than 62%, per LSEG.

These revisions make NVDA look attractively priced once you consider how fast the stock is rising relative to its growth prospects. Indeed, by at least one metric – the price/earnings-to-growth (PEG) ratio – Nvidia stock looks very cheap on a relative valuation basis.

Here's why: since NVDA stock is trading at 35 times expected earnings and has a LTG forecast of more than 62, its forward PEG is 0.6. To put that in perspective, the S&P 500 trades at a PEG of 2.1.

By this measure, NVDA trades at a 70% discount to the broader market. That's not bad, but then Nvidia and the broader market are sort of apples and oranges.

That's why we want to look at Nvidia's PEG relative to its peers and itself. This gives us an idea of what sort of premium the market has been willing to pay for Nvidia's growth prospects in the past.

And what do we find? Bulls will be happy to know that with a PEG ratio of 0.6, Nvidia stock trades at a 70% discount to the semiconductor industry average.

Even more intriguing, however, is that NVDA stock also trades at a steep discount to its own five-year average. Indeed, per LSEG Stock Reports Plus, if Nvidia's PEG "returned to historical form," the stock would trade at $349.04.

That's not a price target, mind you, it's just some modeling. But it does give NVDA stock implied price upside of about 150% from current levels.

As for Wall Street's collective wisdom on this top-rated Dow Jones stock, of the 63 analysts issuing opinions on NVDA surveyed by S&P Global Market Intelligence, 47 call it a Strong Buy, 12 have it a Buy and four say it's a Hold.

That works out to a consensus recommendation of Strong Buy, making Nvidia one of the Street's top S&P 500 stocks to buy too.

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Berkshire Hathaway (BRK.B) was once again a net seller of stocks in its most recent quarter. But if you think Warren Buffett, who will step down as CEO at the end of 2025, has caught the "AI is a bubble" bug, think again.

The Oracle of Omaha has been easing off equities and hoarding cash for quite a while. In the past three years, Berkshire was a net seller of stocks to the tune of $190 billion. Also noteworthy is that Berkshire hasn't engaged in stock buybacks since May 2024.

As a result, Buffett is running a sort of "barbell" portfolio. Berkshire, with a market cap of more than $1 trillion, holds $280 billion in stocks and a whopping $380 billion in cash.

Berkshire's cash pile has been boosted by comparatively high short-term interest rates, as well from pruning its portfolio. Buffett once again pared BRK.B's stakes in major long-term holdings such as Apple (AAPL), Bank of America (BAC) in the most recent quarter.

The Apple sales are particularly noteworthy. Not too long ago, the iPhone maker accounted for roughly 40% of Berkshire U.S. equity portfolio. Today, it's closer to 23%.

For some folks, these are highly disquieting developments. When one of the greatest investors of all time is selling massive amounts of stock in some of his favorite names, it's understandable if people believe they would feel better about it if only they knew why.

First things first, however. Buffett took pains to explain to Berkshire shareholders at their annual meeting in May that the iPhone maker is still, er, the Apple of his eye. (It would have been embarrassing not to, considering Apple CEO Tim Cook attended the event in person.)

If Buffett has a problem with AAPL, it's that the value of Berkshire's stake has grown tremendously at a time when he expects corporate tax rates to rise, probably sometime in the not-too-distant future.

As Buffett told the Berkshire faithful in August 2024: "If I'm looking at a 21% rate this year and then we're [paying] a lot higher percentage later on, I don't think you'll actually mind the fact later on that we sold a little Apple this year."

Perhaps the same thinking informed Berkshire's paring of its stake in Bank of America. The fact that owning more than 10% of a publicly traded company's shares triggers disclosure requirements large shareholders would rather avoid for as long as possible is another reason to bring one's ownership below a regulatory threshold.

What we know is that Buffett has been a net seller of equities for 12 consecutive quarters. Share repurchases have ground to a halt, too. For context, Berkshire repurchased more than $9 billion worth of BRK.B stock in all of 2023.

This is not the sort of behavior one typically sees in someone with excessive confidence in equity prices.

What gives?

Buffett stocks sales: An expert's take

If Warren Buffett is selling stocks and not buying back his own, that might tell us something about the Oracle of Omaha's view of the market, writes Nicholas Colas, co-founder with Jessica Rabe of DataTrek Research.

As a multidecade market watcher and market participant, Colas posits three potential explanations for Buffett's "unusual activity."

The first explanation is that Buffett is calling a top. "Buffett sees stocks as overvalued, including his own, and therefore susceptible to a deep correction or outright bear market," Colas writes.

It's interesting that Berkshire holds $380 billion in cash. "That’s a lot of firepower if markets see a sustained drop," notes Colas. "While Berkshire is not especially expensive, its multiple may be worrisome to a value investor."

Don't forget that Buffett likes nothing more than to be greedy when others are fearful. If stocks crash, Berkshire will be able to go shopping for assets at deep discount prices.

M&A on tap

Then there's the possibility that Berkshire is amassing cash to effect a truly whale-sized deal. "Berkshire may have identified one or more large acquisitions and is raising capital for those purchases," Colas writes. He adds that BRK.B's $380 billion in cash would comfortably buy all of Coca-Cola (KO) or Goldman Sachs (GS).

Colas emphasizes that the latter two are only examples, not risk arbitrage trading ideas. They do make sense, however. Coca-Cola, a Buy-rated Dow Jones stock, has been a core Berkshire holding for four decades.

As for Goldman Sachs, Berkshire has been a major shareholder in the past. (Recall that Buffett gave GS an injection of capital during the Great Financial Crisis.)

Passing the baton

Lastly, Colas postulates that it's possible Buffett is simply preparing the company for his departure as CEO. (He will stay on as chairman.)

Perhaps Buffett "wants to clear the decks for his successors to remake Berkshire's portfolio and rethink the company's stock repurchase program," Colas says.

"At 95 years old, he has certainly earned the right to ride off into the sunset as one of the greatest investors of all time."

The bottom line

The most important takeaway from Colas' note: "We wouldn't read too much into Buffett's latest moves since there is more than one logical explanation for his actions."

Let's pause on that for a moment, because it's important. As folks have noted before, if copying Warren Buffett's buys and sells was all it took to become the next Warren Buffett, there would be a lot more Warren Buffetts in the world.

As far as we know, there is still only one.

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Whether your preferred cliche is "talk about buying high" or "better late than never," Nvidia (NVDA) will at long last replace Intel (INTC) in the Dow Jones Industrial Average.

Oh, and by the way, Dow (DOW) is getting the boot too. It will be swapped out of the venerable blue-chip average for Sherwin-Williams (SHW). The NVDA and SHW changes will take place before the market opens on November 8.

As much interest as such events generate, being tapped for the Dow is more symbolic than material. After all, the S&P 500 is the main benchmark for U.S. equity performance. That's why many trillions of dollars are invested in products that track the index.

For example, the largest exchange-traded fund (ETF) in the world, the SPDR S&P 500 ETF Trust (SPY), has more than $590 billion in assets under management alone. A comparable product for the DJIA, the SPDR Dow Jones Industrial Average ETF Trust (DIA), holds less than $39 billion in assets under management.

Also know that, unlike the S&P 500 or the Nasdaq Composite, the Dow is weighted by price rather than by market cap. Although Nvidia has an outsized influence on the movements of the cap-weighted benchmarks, at current prices NVDA stock will be as important to the DJIA as, roughly, 3M (MMM).

There's also the fact that it would have been nice if the keepers of the Dow had made this move sooner rather than later. Once Nvidia split its stock last spring, it became a good fit for the Dow.

Intel, on the other hand, has been dead weight on the Dow for decades.

Indeed, NVDA lapped INTC a long time ago as a credible representative of the semiconductor sector in a concentrated portfolio. (Recall that the Dow comprises just 30 stocks.)

True, NVDA's share price pre-split made it essentially ineligible for Dow membership, but it's impossible not to look back at the charts and wonder what could have been. The bottom line is that the Dow would be higher today had NVDA been a component rather than INTC.

Nvidia for the long run

As we have noted, anyone who put $1,000 into Intel stock 20 years ago has endured a destruction of their capital. Nvidia, on the other hand, has been among the greatest wealth creators of the past several decades. Have a look at what $1,000 invested in Nvidia stock 20 years ago would be worth today. If you wish you had a time machine, you are not alone.

Suffice to say the DJIA's performance would have been better with Nvidia in it. But that wasn't possible. So, is this better late than never?

That's harder to say. Ordinarily, one wants to buy low. Nvidia is up 178% so far this year on a price basis. Heck, shares have gained nearly 30% over the past three months. There's another Wall Street cliche about the easy money already having been made. And it is always true that past performance is not a guarantee of future results.

Either way, the DJIA is certainly more representative of whatever it's supposed to represent with NVDA in it rather than INTC. But apart from having the imprimatur of the editors of the Dow, nothing fundamental has changed.

This fact by itself should be of enormous comfort to Nvidia bulls, of which there are legions on the Street. Of the 62 analysts issuing opinions on NVDA stock surveyed by S&P Global Market Intelligence, 48 rate it at Strong Buy, 10 say Buy and four call it a Hold. That works out to a rare consensus recommendation of Strong Buy. Indeed, Nvidia routinely makes the list of analysts' top S&P 500 stocks to buy.

As to whether you should add to your exposure to Nvidia stock based on its inclusion in the Dow, the answer is no. If you own diversified funds or ETFs tracking, for example, the S&P 500, Nasdaq Composite or Nasdaq-100, you already own Nvidia – and it's probably enough.

As exciting and enviable as Nvidia's position in artificial intelligence (AI) may be, it is ultimately a chip maker. The chip industry is cyclical, and no stock has ever gone up in a straight line.

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Whether you like it or not, members of Congress are allowed to buy and sell stocks. True, federal law prohibits them from using "nonpublic information derived from their official positions for personal benefit," and they're required to disclose their trades.

That said, it's understandable if folks don't quite trust politicians to be on the up and up when their personal fortunes might appear to be in tension with their duties as elected representatives.

Perhaps this is unfair; even cynical. But to modify a famous quote from Upton Sinclair, it's difficult to get a person to understand something when that person's salary depends upon the person not understanding it.

Take, for instance, the uproar around President Donald Trump, who said shortly before announcing a reversal on reciprocal tariffs that it "is a great time to buy stocks."

The reversal sparked a historic stock market rally and has some high-profile Democrats questioning if anyone in the Trump administration profited off the announcement.

Disclosure rules are supposed to help mitigate this problem. Thanks to these requirements, the public can follow what members of the House and Senate are doing with their investments.

Before we go further, please note that this activity shouldn't be used for trading purposes.

After all, insider buying and selling at publicly traded companies is voluminously disclosed and analyzed, but it doesn't really tell us much. That's because insiders – the executives and board members who know what's going on – can sell for any number of legitimate reasons, from paying tuition to portfolio diversification.

When it comes to stocks, insider buying is actually a more useful piece of information. And even then, it's not exactly a screaming buy signal.

Using insider activity among members of Congress as the basis for some kind of trading system is not a rigorous idea.

With those caveats out of the way, it is indeed interesting to see which stocks, bonds and private investments are most popular with members of the House and Senate. Perhaps more interesting is how certain pols churn their portfolios, which is to be avoided if you're a retail investor.

Have a look at the below table to see which politicians were the most active traders by volume over the past 90 days, according to data from Capitol Trades.

Stocks politicians are buying and selling

Look past the municipal debt and investments in limited liability companies, and you can see that pols are pretty normal when it comes to their buys. Top-rated Dow Jones stocks, mega-cap tech names and reliable and rising dividend-payers routinely make the list of our representatives favorite names.

Both sides of the aisle like many of the hottest stocks, including Apple (AAPL), Amazon.com (AMZN), Oracle (ORCL) and Broadcom (AVGO) these days – but then so does pretty much everyone else.

Interestingly, as much as Representative Ro Khanna (D-Calif.) is associated with tech investing, a number of his most recent biggest buys were stalwart blue chips such as JPMorgan Chase (JPM), the nation's biggest bank by assets, and Warren Buffett's Berkshire Hathaway (BRK.B).

Meanwhile, in addition to buying shares in speculative artificial intelligence (AI) firm BigBear.ai Holdings (BBAI), Representative Lisa McClain (R.-Mich.) also picked up Air Products and Chemicals (APD), which happens to be one the best dividend stocks for reliable dividend growth.

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Microsoft (MSFT) knows how to keep long-term investors happy. The tech giant is returning another $60 billion in cash to shareholders through a new stock buyback plan and raised its dividend by more than 10%.

Microsoft's share repurchase program, which has no expiration date, replaces its previous $60 billion authorization announced four years ago. Meanwhile, investors also cheered the news that shareholders of record as of Nov. 21 will receive a quarterly dividend of 83 cents per share, up from the current 75 cents a share.

Microsoft disbursed nearly $22 billion in dividends over the past 12 months and still had levered free cash flow of $56.7 billion. Even better for long-time dividend-growth investors, Microsoft has hiked its payout every year for more than two decades. If it can keep its streak alive, Microsoft will be eligible for inclusion in the S&P 500 Dividend Aristocrats, which are some of the best dividend stocks for reliable and rising payouts.

Please note that although the share repurchase program matches Microsoft's largest-ever authorization, $60 billion represents only about 1.8% of its massive $3.22 trillion market cap.

Shares in Microsoft, the world's second most valuable publicly traded company after Apple (AAPL), were actually lagging the broader market by about 3 percentage points on a price basis for the year-to-date through September 17. 

But as a long-term holding, MSFT stock is hard to beat. Indeed, anyone who put $1,000 into Microsoft 20 years ago would be very pleased with their returns today.

Wall Street loves MSFT stock

Wall Street analysts were already plenty bullish on the Magnificent 7 stock before it announced its plans to return more cash to shareholders. Only three Dow Jones stocks garner Strong Buy consensus recommendations, according to data from S&P Global Market Intelligence. 

Of the 56 analysts issuing opinions on Microsoft stock, 40 call it a Strong Buy, 14 have it at Buy and two rate it at Hold. Only UnitedHealth Group (UNH) gets a higher rating from industry analysts than MSFT.

Meanwhile, with an average target price of $502, the Street gives MSFT stock implied price upside of 16% over the next 12 months or so. 

Analysts' bullishness on Microsoft stems largely from its enviable position in generative artificial intelligence (AI). 

As the "leading generative AI enabling provider," Microsoft offers the most "comprehensive end-to-end AI tooling stack and cutting-edge front-end generative AI applications across its entire portfolio of products," notes the software team at Truist Securities, which rates shares at Buy.

"Microsoft is expected to be a leading benefactor of AI workloads across each layer of the generative AI value chain," says Truist. "From increased data storage and high-performance compute to additive workloads across their PaaS portfolio. Additionally, their Copilot products are expected to add fuel to expansions and upsells across their application portfolio."

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The Federal Reserve is going to cut interest rates at the next Fed meeting, experts say. Only the size and pace of the central bank's easing campaign remain in doubt.

To recap: the worst bout of inflation to hit the U.S. economy since the Carter and Reagan administrations compelled the central bank's rate-setting committee to raise the short-term federal funds rate to a 23-year high. It has been sitting at a target range of 5.25% to 5.5% for more than a year. Inflation peaked more than a year ago but remains sticky, making the rate-setting committee, the Federal Open Market Committee (FOMC), cautious about easing too soon. 

However, the Fed has a dual mandate. In addition to stable prices, it is supposed to support maximum employment. And, alas, the lagged effects of restrictive monetary policy are beginning to show up in the labor market. Fed Chief Jerome Powell has always said the FOMC would be data dependent, and he acknowledged risks to the jobs side of the mandate at the July Fed meeting. Powell doubled down on his dovish turn at Jackson Hole in August.

Unless it's an emergency, the Fed doesn't make changes to policy without telegraphing them well in advance. A rate cut at the next Fed meeting isn't a certainty, but it would be a shock if the FOMC stood pat. 

A rate cut is coming

"History back to 1990 supports the idea that an initial Fed rate cut of 50 basis points signals an imminent recession (2001 and 2007)," write Nicholas Colas and Jessica Rabe, co-founders of DataTrek Research, in a note to clients. "Initial cuts of 25 basis points (1995, 1998, 2019) do not carry that baggage. Powell and the FOMC know this history."

Colas and Rabe expect a quarter-point cut, or 25 basis points (0.25%), at the next Fed meeting. However, a cut of 50 basis points (bps) remains very much in play. 

As of September 16, interest rate traders assigned a 61% probability to 50 bps of cuts, according to CME Group's FedWatch Tool, up from 50% the previous session. Meanwhile, the probability of a quarter-point cut fell to 39% from a coin flip.

It's also important to know that market participants might have a bit of a blind spot as they head into the next Fed meeting. After all, we're set to get a new Summary of Economic Projections (SEP), also known as the dot plot. This collection of forecasts from Fed governors and presidents tends to upset the market's previous assumptions.

The bottom line is that regardless of how much the Fed cuts at its next meeting, the race is already on to predict the trajectory of future reductions to borrowing costs. 

With the Fed set to pivot, we turned to economists, strategists, investment officers and other experts for their thoughts on monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.

Fed rate cuts: what the experts say

"We interpret comments from Fed officials just ahead of the blackout period to mean that the FOMC is more likely to cut by 25 bps than 50 bps. We think a 50 bps cut would be a sensible precaution against further labor market softening, but the Fed leadership has communicated a sufficiently dovish reaction function for the bond market to price cuts between 25 bps and 50 bps for several meetings, which also lowers borrowing rates and eases financial conditions today." – Jan Hatzius, chief economist at Goldman Sachs

"The Fed has the green light to cut 25 bps given that the August CPI report was in line with expectations. It's possible that some will be disappointed that there wasn't a lower-than-expected inflation reading, which might have given the Fed more room to cut 50 bps, but most of the Fed speakers have already telegraphed their desire to start slowly and not begin with a jumbo cut. Going forward, the risks are clearly weighted toward slowing growth and a deteriorating labor market, and that's why there are still four 25 bps cuts priced in with only three meetings left in the year (i.e. implying at least one of the three meetings would have a 50 bps), but if the economy continues to slow – and not drop into an abrupt recession – the Fed will be able to cut at a measured, 25 bps-per-meeting pace." – Chris Zaccarelli, chief investment officer at Independent Advisor Alliance

"The Fed probably should cut 50 bps next week … 

As the Fed themselves have said, inflation risks are moving into the rearview mirror, and they do not want to see further labor market weakness. Though strong wage growth suggests the bottom has not yet fallen out of the labor market, jobs creation has declined quickly. In an environment where policy is already restrictive by around 200 bps, moving more quickly towards neutral is a highly reasonable stance, in our view.

... but unless we see a downside surprise on inflation, my base case is that they'll cut 25 bps." – Lauren Goodwin, economist and chief market strategist at New York Life Investments

"Following the payrolls report last week, we updated our Fed call. We now expect the Fed to cut rates by 25 basis points (bps) per meeting starting next week and until March 2025. After these cuts, we think the Fed will be more gradual and resort to one cut per quarter. We still see outsized recession-like cuts as unlikely unless the economy materially deteriorates." – Antonio Gabriel, global economist at BofA Securities

"August's CPI report cemented market expectations that the FOMC will ease by 25 bps at its next meeting. The implied probability of a 25 bps move jumped to 83% from 66% shortly after the August core CPI print. We think investors are now well positioned for September's meeting, but we still see a strong chance of 50 bps cuts in both November and December." – Ian Shepherdson, chairman and chief economist Pantheon Macroeconomics

"Stable producer prices should drive investment and that will drive the economy. It is time for the Fed to cut, but they may well take it slow and steady. That seems to be their operating model. A 25 bps cut in September is the most likely outcome." – Scott Helfstein, head of investment strategy at Global X 

"The Federal Reserve is set to start shifting policy and lower rates at their next meeting. The big question will be whether the Fed cuts by 25 bps or 50 bps, and it'll likely come down to Chair Powell as to whether they go big to get ahead of clearly slowing labor market trends." – Sonu Varghese, global macro strategist at Carson Group

"The Fed is weighing the stickiness of service price inflation on the one hand against the softening of the job market on the other hand. The tradeoff makes them more likely to cut rates by a quarter percent at next week's decision than make a larger half-percent cut." – Bill Adams, chief economist at Comerica Bank

"Inflation trends will give the Fed the opportunity to pivot toward the employment mandate for the rest of this year. Given the stickiness of services inflation, the Fed will likely cut by 25 bps in the upcoming meeting and reserve the potential for more aggressive action later this year if we have further deterioration in the job market." – Jeffrey Roach, chief economist at LPL Financial

"Sticking the landing on rate policy is important to the Fed, but so is controlling the narrative and maintaining the central bank's credibility. With that in mind, there was nothing in the August inflation report that was likely to sway policymakers from the measured quarter-percent cut that they've been guiding expectations toward for some time." – Jim Baird, chief investment officer at Plante Moran Financial Advisors

"We find ourselves at a point where the markets are pricing in an aggressive policy rate cutting cycle, which to us appears to be overdone relative to what the Fed has suggested would be appropriate and relative to the underlying economic conditions at this stage. So, while we're quite certain that the Fed will commence with its rate cuts at its next meeting, there are several significant unknowns that cloud the extent and speed of rate cuts. From election/policy uncertainty for 2025, U.S. debt/Treasury supply dynamics and a particularly impactful period for volatile seasonal factors in economic data, there is a good deal we don't now know about the year ahead." – Rick Rieder, chief investment officer of global fixed income at BlackRock and head of the BlackRock global allocation investment team

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American Airlines (AAL), Etsy (ETSY) and Bio-Rad Laboratories (BIO) will be dropped from the S&P 500 later this month to be replaced by Palantir Technologies (PLTR), Dell Technologies (DELL) and Erie Indemnity (ERIE).

Shares in the latter three companies popped on the news Monday, but it remains to be seen whether they're buys beyond the initial catalyst of being tapped to join the most widely tracked equity index. 

Meanwhile, it's not surprising to see AAL, ETSY and BIO get the boot, as they were among the smallest and least material holdings in the S&P 500. 

Stocks tend to get a lift from inclusion in the S&P 500 because many trillions of passive dollars are held in products that track the index. The SPDR S&P 500 ETF Trust (SPY), the largest exchange-traded fund (ETF) in the world, has more than a half-trillion dollars in assets under management all by itself. The bottom line is that loads of funds and ETFs now have to pick up shares in PLTR, DELL and ERIE. 

The changes "ensure each index is more representative of its market capitalization range," S&P Dow Jones Indices said in a statement. "The companies being added to the S&P 500 are more representative of the large-cap market space."

Tech stocks CrowdStrike (CRWD) and GoDaddy (GDDY) were added to the S&P 500 early this year. However, the collective market caps of the S&P 500's newest tech names won't move the needle all that much in a cap-weighted index dominated by Magnificent 7 stocks such as Microsoft (MSFT), Apple (AAPL) and Nvidia (NVDA).

Analysts' takes on PLTR, DELL, ERIE

Palantir is a tech company that specializes in big data analytics. With customers including the U.S. intelligence community and Department of Defense, its operations can be somewhat opaque. Meanwhile, Wall Street is split on PLTR's prospects over the next 12 to 18 months.

Of the 19 analysts covering the stock surveyed by S&P Global Market Intelligence, four call it a Strong Buy, two say Buy, six have it at Hold, three say Sell and four rate it at Strong Sell. That works out to a consensus recommendation of Hold, which is sort of like damning the stock with collective faint praise. 

Valuation appears to be a sticking point between PLTR's admirers and detractors. That makes sense. After all, shares have essentially doubled over the past 52 weeks. 

Speaking for the bulls, Argus Research analyst Joseph Bonner writes that "shares are highly volatile and priced at a premium." At the same time, the analyst says Palantir is a "highly differentiated software company reliant upon new AI-powered applications to expand its business. Our long-term rating is a Buy."

Dell, which sells everything from servers and software to information security services, has seen its stock rise almost 50% over the past year. (That's more than double the performance of the S&P 500.) Analysts see more upside ahead thanks to the build-out of all things to do with generative AI. 

"Server and networking growth is impressive (+80%), given the momentum for AI servers that is propelling backlog growth," writes CFRA Research analyst Shreya Gheewala (Buy). "We like DELL's growing pipeline tied to Tier-2 cloud providers/enterprise customers, while Windows 10 end-of-life support and interest in on-device AI should propel commercial PC demand/pricing."

Of the 22 analysts issuing ratings on the stock surveyed by S&P Global Market Intelligence, 12 call it a Strong Buy, seven say it's a Buy and three have it at Hold. That works out to a consensus recommendation of Buy with high conviction.

Erie Indemnity might not be as well known as American Airlines or Etsy, but its market cap of about $27 billion makes it far more material to the benchmark index. Shares in the property and casualty insurance firm generated a total return (price change plus dividends) of 87% over the past year. That beat the S&P 500 by more than 60 percentage points.

Analysts see more outperformance ahead. Unfortunately, only two of them follow ERIE. One rates shares at Strong Buy. The other says they're a Hold. For what it's worth, that works out to a consensus recommendation of Buy.

"The combination of growing management fee income and investment income should allow Erie Indemnity to maintain a positive earnings performance through 2025, with our estimates suggesting growth in the 20% to 30% range," writes William Blair analyst Adam Klauber, who rates the stock at Outperform (the equivalent of Buy).

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Warren Buffett's Berkshire Hathaway (BRK.B) initiated small positions in Ulta Beauty (ULTA) and Heico (HEI) in the second quarter, bought more Chubb (CB), pared stakes in eight names – most notably, Apple (AAPL) and Chevron (CVX) – and exited bets on Paramount (PARA) and Snowflake (SNOW).

There were other moves, as well, but the biggest news to come out of Berkshire's latest regulatory filing was already known. Buffett slashed Berkshire's stake in Apple by almost half. As previously reported, the holding company also reduced its exposure to top holdings such as Chevron and Bank of America (BAC).

Keep in mind that Buffett told Berkshire shareholders that the Apple sales were done for tax purposes, as he expects corporate tax rates to rise sometime in the not-too-distant future. The same thinking could apply to BRK.B's other sales, but then it's not unusual for Buffett to be a net seller of equities when stocks are trading at record levels.

All told, Berkshire sold roughly $77 billion in equities in Q2 – mostly Apple – and purchased less than $2 billion. At any rate, with exactly 400 million Apple shares still in the portfolio, Buffett would appear to be done selling his favorite stock.

Earlier this year, the greatest long-term investor of all time said AAPL is "even better" than American Express (AXP) or Coca-Cola (KO), two "wonderful" businesses that Berkshire has owned since the early 1960s and late 1980s, respectively.

Perhaps it's a coincidence, but Berkshire now holds 400 million AAPL shares – or the exact same number of shares it has held in KO for decades. 

Before we detail Berkshire's quarterly buys and sells, it's important to know that Buffett has always maintained a highly concentrated portfolio. The top five holdings account for almost three-quarters of its U.S. equities portfolio value, while the top 10 account for more than 90%. 

As Buffett likes to say, diversification is for people who don't know what they're doing.

Stocks Warren Buffett is buying

Berkshire picked up two new stocks in Q2: Ulta Beauty and Heico. Berkshire bought 690,000 shares of Ulta Beauty worth $266 million at the end of the Q2. With a weight of 0.1% in the Berkshire Hathaway portfolio, or its 30th largest position, the cosmetics retail chain won't be moving the needle much on Berkshire's returns.

Meanwhile, with a weight of just 0.07%, Heico is even less material. Berkshire accumulated a little more than 1 million shares in the supplier to the aerospace industry. The stake was worth $185 million as of the end of Q2. 

The comparatively small size of the purchases could mean they were initiated by Buffett's co-portfolio managers Ted Weschler or Todd Combs.

On the other hand, one of the largest additions Berkshire made in Q2 was probably the work of Buffett himself. As previously disclosed, BRK.B bought another 7 million shares in Occidental Petroleum (OXY). (Buffett has added to OXY on weakness in the past.) The holding company owned 255 million shares worth $16 billion at the end of the quarter. At 5.8% of its portfolio, OXY is Berkshire's sixth largest holding.

In another interesting move, Buffett also added to Chubb, the insurance company Berkshire first picked up just a quarter ago. The holding company increased its stake by 4.3%, or more than 1 million shares. With roughly 27 million shares worth $6.9 billion at quarter's end, Chubb accounts for a hefty 2.5% of the portfolio, or Berkshire's ninth largest holding.

Elsewhere, Berkshire fiddled with some of its smallest positions, upping its bets on rather immaterial holdings such as Liberty Sirius XM Group, Series C (LSXMK) and Liberty Sirius XM Group, Series A (LSXMA). Note that the company cut its stakes in the tracking stocks last quarter. Berkshire also bought more Sirius XM Holdings (SIRI) – a position it reduced in Q1.

Stocks Warren Buffett is selling

As noted above, Apple accounted for almost all of Berkshire's Q2 sales. Other reductions included Chevron, a Buy-rated Dow Jones stock, which Buffett first purchased four years ago. In Q2, Berkshire cut CVX by 3.6%, or 4.4 million shares. With 119 million shares worth $18.6 billion at the end of the quarter, the integrated oil major is Berkshire's fifth largest holding.

Other sales included a more than 20% reduction in Capital One Financial (COF). Berkshire sold 2.7 million shares in the financial services company in Q2, bringing its position down to 9.8 million shares worth $1.4 billion. With a 0.49% weight in the portfolio, COF is Berkshire's 19th largest bet. 

Berkshire also continued to clean and prune a number of its mid-level equity holdings, paring its stakes in T-Mobile US (TMUS), Louisiana Pacific (LPX), Liberty Media (LLYVK), Liberty Media (LLYVA) and specialty retailer Floor & Decor (FND).

Buffett also closed out its stake in Paramount, dumping all 7.5 million shares. The company first bought PARA in early 2022. It didn't work out.

Lastly, Berkshire exited its position in Snowflake (SNOW), which is believed to have been the work of subaltern Todd Combs. Berkshire made a rare bet on an initial public offering (IPO) with Snowflake in the third quarter of 2020. SNOW has an all-time total return of negative 16%.

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A little over a year ago, I wrote that value stocks were coming back. After trailing growth stocks badly for more than a decade, value beat growth in 2022 and appeared in the ascendancy. 

But I jumped the gun. Over the past 12 months, the S&P 500 Value index performed well, returning 15.3%, but the S&P 500 Growth index did far better, gaining 32.5%. The Russell 1000 Value index, which is calculated in a different way and includes midsize stocks, lagged the Russell 1000 Growth index by even more, returning 13.1% to Growth’s 33.5%. (Returns and other data are as of June 30; securities I like are in bold.)

I am not giving up. Of course, timing the market is impossible, but value and growth move in cycles, and there’s a good case that it is finally value’s turn again. 

Value stocks are those out of favor with investors, as evidenced by lower valuations. Usually, that means profit growth may be consistent but far from spectacular. S&P uses three metrics for identifying value: lower ratios of a stock’s price to its earnings (P/E), book value (P/B) and sales (P/S). Russell pegs value stocks as having lower current P/B ratios, as well as slower book, earnings and sales growth over the past five years and lagging sales projections for the next two years. 

Value led growth in the 1980s, and growth dominated in the 1990s. With the collapse of the tech bubble in 2000, value gained the upper hand for seven years, then passed the torch back to growth. Over the past decade, the S&P Growth index beat the Value index by an average of more than five points per year. That’s a remarkable performance, especially when you consider 2022: The Growth index lost 29.4% and the Value index dropped just 5.2%. 

It's all about technology stocks

Large-capitalization growth stocks have done well lately for two big reasons: first, the spectacular climb of technology stocks, which represent 63% of the assets of the S&P 500 Growth index and just 13% of the Value index; and second, low interest rates, which tend to favor fast-growing companies that take on debt to finance capital investments and research and development. 

BofA Securities issued a report in June that stated, “After two decades of steady underperformance, U.S. value may outperform growth again.” The report referred to a seminar 50 years ago called “Renaissance of Value,” led by Benjamin Graham, the polymath investment guru who was Warren Buffett’s mentor. It is time, wrote BofA analysts, for another renaissance. 

The impending rebirth of value, they wrote, makes sense either in the bull case (with the earnings of value stocks in long-neglected sectors playing catch-up) or in the bear case (with tech revenues hurt by a “hard landing” after the current round of Federal Reserve rate hikes and value stocks doing comparatively better than growth stocks falling from a greater height). 

Finally, wrote the analysts, “the macro shift from a ‘2% world to a 5% world’ [a reference to market interest rates] supports value stocks.” With higher rates, value should outperform growth by 5 percentage points annually, if history is a guide. 

I find this reasoning compelling, and I have two other arguments for value. The first is an instinct that it’s time for a change. Growth has been king for nearly two decades. That’s enough. Trees don’t grow to the moon. My second argument is far more convincing. It is that over the longer term, value has beaten growth handily, and there is no reason this trend won’t continue. 

Growth is good. Bargains are better.

Why does value beat growth? Because cheap beats expensive. Investors often shun value stocks because they get bored with steady performance and need excitement. They want to climb aboard the new, hot thing — not the old, tried-and-true one. 

Value stocks thus get “mispriced” on the low side, just as growth stocks get bid up beyond their true worth. The proof is in the history. Over the past century, value has beaten growth by an annual average of more than four percentage points — a huge margin in the world of investing. What’s more, although investors usually get higher returns for taking on more risk, in the case of value stocks, the risk is actually about 10% lower, based on standard deviation, a measure of volatility. 

Right now, there’s a chasm between value and growth valuations. For example, S&P Dow Jones Indices reports that the average P/E, based on analysts’ earnings projections, for the S&P 500 Value index is 16.3; for the growth index, it’s 27.5. The average P/B ratio for value is 2.7; for growth, it’s 9.6. The S&P 500 Value index has a dividend yield of 2.3%; for growth, it’s 0.7%. (Higher yields are an indicator of value.) 

Because stocks often shift between value and growth categories, the best way to invest in value is through an exchange-traded fund linked to an index. The best choices are iShares S&P Value ETF (IVE, $182) and Vanguard S&P 500 Value (VOOV, $176). For a portfolio that includes smaller stocks and has an even lower proportion of tech shares, consider iShares Russell 1000 Value (IWD, $174) and Vanguard Russell 1000 Value (VONV, $77). All of these ETFs carry expense ratios of less than 0.2%. 

In its recent deep dive on value, BofA recommended three sectors as especially attractive: utilities, energy and banks. I completely agree. Utilities and energy have risen in price but still have low valuations, and they are primed for rising revenues as demand for electricity increases (in part because of the need for powering artificial intelligence computing and electric vehicles) and there are roadblocks — many of them political — to increasing supply. 

You can buy utility stocks through ETFs such as Utilities Select Sector SPDR (XLU, $68) and Fidelity MSCI Utilities Index (FUTY, $44); energy through Energy Select Sector SPDR (XLE, $91) and Van Eck Oil Services (OIH, $316); and banks through Invesco KBW Bank (KBWB, $54) and SPDR S&P Bank (KBE, $46). 

You can also look for individual stocks offering good value. There are few greater pleasures in investing than successfully backing a company that “Mr. Market” ignores or even hates. Here are some candidates: ExxonMobil (XOM, $115), with a forward P/E of 12 and a dividend yield of 3.3%; JPMorgan Chase (JPM, $202), with a P/E of 13 and a yield of 2.3%; Deere (DE, $374), with a P/E of 15 and a yield of 1.6%; and Johnson & Johnson (JNJ, $146), with a P/E of 14 and a yield of 3.4%. All four of the stocks are components of the S&P 500 Value index. 

Just remember that value investing requires conviction and a long time horizon. In his remarks at the value renaissance seminar 50 years ago, Benjamin Graham said it best: “If you believe — as I have always believed — that the value approach is inherently sound, workable and profitable, then devote yourself to that principle. Stick to it, and don’t be led astray by Wall Street’s fashions, its illusions and its constant chase after the fast dollar.”   

James K. Glassman chairs Glassman Advisory, a public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. He owns none of the securities mentioned here. You can reach him at JKGlassman@gmail.com.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Warren Buffett's Berkshire Hathaway (BRK.B) slashed its stake in Apple (AAPL) by almost half during the second quarter, further rattling a tech sector already under scrutiny over its massive spending on AI – and naturally unnerving some Apple shareholders, too.

After all, Apple stock has been the single largest position in the Berkshire Hathaway equity portfolio for years, typically carrying a weight in excess of 40%. And yet Buffett has been paring Berkshire's enormous Apple stake at an alarming rate in 2024.

He's also taken something off the top of Berkshire's second largest holding, Bank of America (BAC).

Buffett has said his preferred holding period is forever. It's also important to know that Buffett is not, and has never been, a market timer. Furthermore, he has had nothing but praise for Apple – calling it "Berkshire's third business" – and openly admires Bank of America CEO Brian Moynihan. 

So what's going on?

Stay tuned for churn

We won't get the full details of which stocks Warren Buffett bought and sold in the second quarter until Berkshire Hathaway discloses its changes in holdings after the market closes on August 14. 

What we do know now is that this isn't the first time Buffett has taken a big bite out of Berkshire's Apple stake this year. As we wrote at the time, BRK.B cut its position in AAPL by 13% in the first quarter. Keep in mind that Buffett was explicit that this was done for tax purposes: 

"Buffett took pains to explain to Berkshire shareholders at their annual meeting in Omaha on Saturday that the iPhone maker is still, er, the Apple of his eye. (It would have been embarrassing not to, considering Apple CEO Tim Cook attended the event in person.)"

If Buffett has a problem with AAPL, it's that the value of Berkshire's stake has grown tremendously at a time when he expects corporate tax rates to rise, probably sometime in the not-too-distant future. 

As Buffett told the Berkshire faithful: "If I'm looking at a 21% rate this year and then we're [paying] a lot higher percentage later on, I don't think you'll actually mind the fact later on that we sold a little Apple this year."

Buffett pointed out that Berkshire's corporate tax rate was 35% just a few years ago. Back in the late 1960s, it was more than 50%. This man has been around a long time. He knows tax policy is never written in stone.

Perhaps Buffett's calculus explains the thinking behind the BAC sales too. As with Apple, Berkshire has enjoyed outsized returns from its investment in Bank of America. Indeed, Buffett liked the bank so much that Berkshire received special regulatory approval to acquire more than 10% of its shares outstanding. That's commitment.

The bottom line is that whatever Buffett is up, it's actually sort of irrelevant. He is a professional capital allocator. It's his job to maximize the returns on the capital entrusted to him. You either trust Warren Buffett or you don't. If you don't trust him, fine. You're not going to hurt his feelings. His track record sort of speaks for itself.

More selling to come

If today's news bothered you, you might want to skip next Wednesday. That's because Berkshire Hathaway tends to be a net seller of equities when stocks are at record highs. 

The holding company sold $77 billion worth of stock in Q2, mostly Apple. But do not be surprised if we learn that Buffett & Co. trimmed or exited positions in any number of other holdings when Berkshire files its Form 13F with the Securities and Exchange Commission after markets close on August 14. 

Buffett has this funny habit of trying to buy stocks when they are selling at lower prices rather than higher prices. Stocks are pretty pricey these days. Buffett is selling. What's the mystery?

By the way, some folks might try to use Buffett's buys and sells as signals for what to do with their own portfolios. 

That would be silly. 

As noted above, Buffett is not a market timer. This is the man who wrote in The New York Times in October 2008 that he was buying stocks. The market didn't bottom until months later, in March 2009. 

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," Buffett said. 

No, Buffett didn't bottom-tick the S&P 500's 50% collapse. The market fell another 28% from the time he penned that op-ed to equities' nadir. And all Buffett did was buy shares in great companies at cheaper and cheaper prices, probably the entire way down. (Berkshire shareholders then benefited by riding those prices all the way back up.)

As much fun as it might be to see which stocks Warren Buffett is buying and selling, you cannot copy his moves and expect to get the same returns. There are a bunch of reasons for this, but let's keep it simple: Buffett has access to a massive pile of really cheap capital and you don't.

You're no Warren Buffett

Berkshire's timing could have been better. It didn't do market sentiment any favors by releasing its results ahead of a global rout in equities that was mostly sparked by what's happening to the Japanese yen. But that's not on Buffett.

Markets go down as well as up. Pullbacks are normal. "The average drawdown from peak-to-trough in a given year in the U.S. stock market going back to 1928 is -16.3%," notes Ben Carlson, director of institutional asset management at Ritholtz Wealth Management. "Since 1950, the S&P 500 has had an average drawdown of 13.6% over the course of a calendar year."

Volatility is the price of admission to the stock market. The greater the reward, the greater the risk. If you can't handle the equity risk premium, stick to bonds.

In the meantime, leave professional capital allocation to the pros. Word is Warren Buffett is pretty good at it.

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Amazon Prime Day might have offered a flurry of deals and discounts on all manner of goods, but analysts say the biggest bargain of all looks to be Amazon.com (AMZN) stock.  

That might sound counterintuitive at first. Amazon stock gained about 30% on a price basis through the first half of 2024 – vs 19% for the tech-heavy Nasdaq Composite – to trade at record levels.

Ordinarily, the idea is to buy low.

But a sum-of-the-parts analysis of the company's underlying businesses suggests AMZN stock has much further to run, analysts say. Indeed, as a services company with rapidly expanding profit margins, upside from generative artificial intelligence (AI) and a track record of building large businesses from scratch, Amazon is really tough to beat.

"AMZN should be valued as a services company rather than a products company," writes Needham analyst Laura Martin, who rates shares at Buy. "Services revenue and margins (including advertising, subscriptions and cloud) are far larger and growing faster than AMZN's core e-commerce business. Services growth implies valuation multiple expansion owing to its high margins."

Multiple expansion, which is when folks are willing to pay a higher price today for expected earnings in the future, makes stock prices go up. Now you might think AMZN stock is already richly valued, seeing as it currently changes hands at more than 33 times the Street's 2025 earnings per share (EPS) estimate. But Amazon is forecast to generate average annual EPS growth of more than 23% over the next three to five years. 

AMZN stock is cheap

In today's market, these are far from unusual valuations. According to data from LSEG Stock Reports Plus, Amazon is actually cheaper than the broader market when you look at how fast its stock price is rising compared to its growth prospects. Furthermore, Amazon stock trades at steep discounts to its own five-year average on both a forward and trailing price-to-earnings (P/E) basis. As for AMZN stock's price-to-sales (P/S) ratio, it trades essentially in line with its own long-term average.

Moreover, Amazon's valuation looks especially compelling when its already impressive potential for revenue growth and margin expansion is set to be turbocharged by artificial intelligence, experts note.

"We believe investors are underestimating AMZN's positioning to win its fair share of AI workloads and believe its platform approach will be a winning strategy over the long term," writes BMO Capital Markets analyst Brian Pitz, who rates AMZN at Outperform (the equivalent of Buy).

If nothing else, Pitz and Needham's Martin have a lot of company. Of the 61 analysts issuing opinions on Amazon surveyed by S&P Global Market Intelligence, 44 call it a Strong Buy, 15 say it's a Buy and two have it at Hold.

That works out to a rare consensus recommendation of Strong Buy for Amazon stock, and with high conviction to boot. Here's how Argus Research analyst Jim Kelleher (Buy) explains the Street's collective bullish outlook: "AMZN appears inexpensive amid the AI-driven rally."

This is kind of important because plenty of investors have avoided Amazon stock in the past based on concerns its valuation is too rich, and it looks to have been a mistake.

Amazon stock for the long run 

Amazon, which began life as a modest website for book buyers, went public in 1997, and has since generated truly outsized wealth for shareholders. An analysis by Hendrik Bessembinder, finance professor at the W.P. Carey School of Business at Arizona State University, found that Amazon was one of the best stocks in the world over three decades. 

After all, anyone who put $1,000 into Amazon stock 20 years ago has enjoyed truly market-crushing returns. For its entire life as a publicly traded company, AMZN has generated an annualized total return of more than 32%. The S&P 500, by comparison, returned not-quite 11% annualized, according to data from YCharts.

Put another way, since it debuted, Amazon stock has pretty much tripled the performance of the S&P 500. 

Little wonder then that Amazon, which was added to the Dow Jones Industrial Average in February, is now the highest-rated name among all 30 Dow Jones stocks. Or check out analysts' top S&P 500 stocks to buy now, and you'll find Amazon is high on that list. 

The bottom line on Amazon stock

Analysts say the company has a history of execution and is particularly well suited to cash in on AI.

"Given its indisputable franchise leadership, ability to leverage its vendor relationships in the retail space, and market dominance and superior growth in infrastructure-as-a-service, we believe that AMZN warrants long-term accumulation in most equity accounts," Argus Research's Kelleher writes. 

Investors should initiate new positions or dollar-cost-average into existing Amazon positions on share price weakness, the analyst adds. 

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If you needed more evidence that being added to the S&P 500 is what Wall Street likes to call a positive catalyst, witness what happened to shares in CrowdStrike (CRWD), KKR (KKR) and GoDaddy (GDDY) at the start of trading this week.

Shares in all three companies popped on the news that they will be added to the main benchmark for U.S. equity performance. KKR, CrowdStrike and GoDaddy will replace Robert Half (RHI), Comerica (CMA) and Illumina (ILMN) in the S&P 500 on June 24, S&P Dow Jones Indices said in a statement Monday. 

Stocks tend to get a lift from inclusion in the S&P 500 because many trillions of passive dollars are held in products that track the index. The SPDR S&P 500 ETF Trust (SPY), the largest exchange-traded fund (ETF) in the world, has more than half-a-trillion dollars in assets under management all by itself. The bottom line is that loads and loads of passive funds and ETFs now have to pick up shares in CRWD, KKR and GDDY.

As for the reason for the shakeup, S&P said that the changes "ensure each index is more representative of its market capitalization range. The companies being added to the S&P 500 are more representative of the large-cap market space."

Analysts' takes on CRWD, KKR and GDDY

As a reminder, being tapped for the S&P 500 is not an endorsement by the editors of the index to buy the stock. Rather, the stocks in question have merely met the criteria and are deemed better fits than the ones moved down into the mid- and small-cap indexes. 

As for CrowdStrike, shares gained nearly 50% for the year to date through early June, pushing the cybersecurity company's market cap up to $93 billion, or roughly the same size as current S&P 500 stock Starbucks (SBUX). Meanwhile, the Street likes CRWD's prospects going forward. Of the 51 analysts issuing opinions on CrowdStrike stock surveyed by S&P Global Market Intelligence, 34 call it a Strong Buy, 13 say Buy and four have it at Hold. That works out to a consensus recommendation of Strong Buy.

Analysts are bullish on KKR, too, although with slightly less conviction than they have for CRWD. Shares in the private equity firm added more than 30% for the year to date through early June, giving it a market cap of nearly $97 billion. That's a sum roughly equivalent to current S&P 500 constituent Palo Alto Networks (PANW). Analysts give KKR a consensus recommendation of Buy.

Web hosting company GoDaddy is another stock having a terrific 2024. Shares gained more than a third for the year to date through early June, pushing GDDY's market cap up to $20 billion. That's bigger than S&P 500 member Alexandria Real Estate Equities (ARE), which happens to be one of analysts' top S&P 500 stocks to buy now. The Street is bullish on GDDY, too, mind you, assigning it a consensus recommendation of Buy with strong conviction. 

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Apple (AAPL) stock declined in an up market Monday after Berkshire Hathaway (BRK.B) disclosed it cut its stake by 13% in the most recent quarter. 

Is Warren Buffett, Berkshire's chairman and CEO, losing faith in what is by far the company's largest holding?

Not at all.

Buffett took pains to explain to Berkshire shareholders at their annual meeting in Omaha on Saturday that the iPhone maker is still, er, the Apple of his eye. (It would have been embarrassing not to, considering Apple CEO Tim Cook attended the event in person.) 

For the record, the greatest long-term investor of all time said that AAPL is "even better" than American Express (AXP) or Coca-Cola (KO), two "wonderful" businesses that Berkshire has owned since the early 1960s and late 1980s, respectively.

Indeed, during the question and answer portion of the meeting, Buffett was asked: "[Has your] view of the economics of Apple business or its attractiveness as an investment changed since Berkshire first invested in 2016?"

Buffett: "No. But we have sold some shares."

Why? Because corporate taxes are "likely" to go up "later." He figures the federal government – at some unknown future date – will have to raise taxes to reduce the deficit. 

"With current fiscal policies, I think something has to give," said Buffett. "I think that higher taxes are quite likely."

That's not exactly a heretical idea, regardless of your policy preferences or political inclinations. It's also kind of irrelevant. Buffett is a steward of other people's capital. It's his job to maximize their returns. 

"If I'm looking at a 21% rate this year and then we're [paying] a lot higher percentage later on, I don't think you'll actually mind the fact later on that we sold a little Apple this year," Buffett said.

He noted that Berkshire's corporate tax rate was 35% just a few years ago. Back in the late 1960s, it was more than 50%.

Buffett on paying taxes

Mind you, Buffett is no tax dodger. Here are some of the things he said about taxes when explaining the Apple stock sales:

• "Almost everybody I know pays a lot more attention to not paying taxes than I think they should."
• "We don't mind paying taxes at Berkshire."
• "We at Berkshire always hope to pay substantial federal income taxes. We think it's appropriate [to pay taxes] to a country that's been as generous to our owners. It doesn't bother me in the least to write that check. I would really hope that with all that America has done for all of [Berkshire shareholders], it shouldn't bother you that we do it."

The bottom line is that Berkshire doesn't mind paying taxes. But if they're going to go up, better to pay them at a lower rate today than a higher rate tomorrow. 

Apple by the numbers

Apple is still Berkshire Hathaway's largest holding.

At one point last year AAPL accounted for about half of the holding company's U.S. stock portfolio. However, with 790 million shares (down from 905 million at the end of 2023), Apple is now somewhere in the lower-to-mid-40% range.

That's a hefty allocation, but then Berkshire has always maintained a highly concentrated portfolio. Including its positions in Japanese brokerages, Berkshire's top five holdings – AAPL, Bank of America (BAC), AXP, KO and Chevron (CVX) – comprise about 75% of its equity portfolio.

We won't know the exact breakdown of Berkshire's holdings until it files its Form 13F with the Securities and Exchange Commission after the market closes on May 15.

Whatever the filing reveals, Apple bulls needn't fret about Berkshire Hathaway losing its taste for Apple.

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Have you ever noticed that equity investors can't have nice things? As miserable as we are when stocks are going down, we're even more unhappy when they're going up.

There's an empirical explanation for this psychological phenomenon. It's called "loss aversion." Humans are at the mercy of all sorts of cognitive biases, and one of the more perverse ones is that we experience far more pain from losing money than we experience pleasure from winning the same sum.

That's why when markets are rising, stocks are said to be climbing a wall of worry. The higher stocks climb, the more investor anxiety mounts. That's loss aversion at work.

Cut to today, with markets at record highs and valuations stretched by just about any metric you care to use, and it's only natural for investors to question if stocks are in a bubble.

Stocks never go up in a straight line, but that's pretty much what the S&P 500 did after bottoming out early last spring. From its April 7, 2025, intraday low to its close on December 31, the benchmark index was up 41.6% on a price basis. Such a torrid run has U.S. equities trading at some of their very priciest levels in history, according to BofA Securities.

As of December 31, on 18 of 20 metrics the S&P 500 was trading at statistically expensive levels, according to a note to clients from Savita Subramanian, head of U.S. equity strategy and U.S. quantitative strategy at BofA Global Research. Four of the metrics — Market Cap to GDP, Price to Book, Price to Operating Cash Flow and Enterprise Value to Sales were at record highs.

Is the stock market in a bubble? Here's how to tell

Happily, valuation is not a timing tool, as strategists take pains to point out. As Subramanian suggests, opportunities remain for investors willing to look for selective sector opportunities

Meanwhile, though questions remain about when and whether the Federal Reserve will cut interest rates amid a backdrop of broadening and accelerating profits, it's not hard to argue for a boom in earnings-per-share and GDP growth.

It's also possible that stocks have structurally re-rated to carrying richer valuations, as Subramanian noted earlier in 2025.

"The S&P 500 has changed significantly from the 80s, 90s and 2000s," explains Subramanian. "Perhaps we should anchor to today's multiples as the new normal rather than expecting mean reversion to a bygone era."

Perhaps most important, bubbles are as much of a psychological phenomenon as a financial one.

There's no substitute for experience on Wall Street, which is why it's always wise to listen to old hands when it comes to divining the market's machinations. Nicholas Colas, co-founder with Jessica Rabe of DataTrek Research, started working full-time on Wall Street in 1986. He lived through the October 1987 stock market crash and has witnessed every boom and bust up close ever since.

Colas has developed a three-point checklist for "spotting unhealthy, runaway markets." Here's a thumbnail version:

The market for initial public offerings gets frothy. Although the number of IPO announcements hit a multiyear high in the third quarter, the market for new issues has been subdued since it peaked in 2021. Higher interest rates and the availability of private-market funding remain headwinds.

"The good news is that history shows a rampant IPO market is a clear sign of a top," Colas notes. "We're nowhere close to that now."

Hallmark mergers and acquisitions (M&A) deals. "Exceptionally bad deals happen at the top, even if at the time they seem quite sensible," Colas writes. "M&A activity is ultimately a function of CEO/board confidence. Just like retail investors chasing hot IPOs at a market peak, senior managers fall prey to the same overconfidence that the good times will last forever."

Happily, M&A activity, while picking up, also remains under control. Through November 30, M&A volume was up 2% year over year in 2025, according to PwC.

A double is a bubble. Colas has a general rule to identify unsustainably high prices in a range of markets. Whenever the S&P 500 doubles in three years or less, stock prices decline shortly thereafter. The same is true about the Nasdaq Composite over any rolling one-year window going back to the early 1970s, notes Colas.

"A double is a sign of speculative excess because macro conditions are never so different that asset prices should rise 100% over a short period of time," Colas says. "Markets are reasonably good discounting mechanisms. When prices double, you know speculation — not fundamentals — are driving those gains."

Even the Nasdaq Composite, which is the frothiest equity market right now, is up "only" 20% over the past year.

Another tech bubble?

The remarkable bull market in equities was given fresh fuel by the Federal Reserve's jumbo interest rate cut in September 2024, but it's uncertain how much more fuel monetary policy can provide from here. Meanwhile, bubble anxiety centers around the AI companies, such as the Magnificent 7, that dominate the S&P 500 and Nasdaq-100.

Naturally, echoes of the bursting of the dot-com bubble are tat the op of anxious investors' minds.

"The introduction of transformative technologies typically attracts growing investor interest as well as significant capital and new competition," writes Peter Oppenheimer, chief global equity strategist and head of macro research Europe at Goldman Sachs. "As enthusiasm builds and stock prices increase, the sum of individual company valuations can overstate the total potential aggregate returns; often a bubble develops and bursts."

Oppenheimer notes the technology sector has generated 32% of the global equity return and 40% of the U.S. equity market return since 2010. This reflects stronger fundamentals rather than irrational exuberance.

"In our view, the technology sector is not in a bubble and is likely to continue to dominate returns," the strategist adds. That said, "concentration risks are high, and investors should look to diversify exposure to improve risk-adjusted returns while also gaining access to potential winners in smaller technology companies and other parts of the market."

Are stocks in a bubble?

None of Colas' time-proven indicators point to a stock market bubble, but a bubble very much remains a possibility in 2026, Colas says. Keep an eye on IPOs, M&A and how fast market levels rise from here.

Also remember that while the explosive growth in all things AI has valuations looking stretched, Goldman Sachs' Oppenheimer notes, "valuations often also understate the opportunities that can accrue in the nontechnology industries that can leverage the technology to generate higher returns."

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Being tapped to join the S&P 500 is kind of a big deal. Witness what happened to shares in Super Micro Computer (SMCI) and Deckers Outdoor (DECK) on Monday.

Super Micro stock added more than 25% at one point during the session on news the AI server, software and infrastructure company will replace Whirlpool (WHR) in the S&P 500 on March 18. 

Not that SMCI needed another catalyst – shares have nearly quadrupled in 2024 alone – but the price action is a good (if exaggerated) example of the importance of being added to the main benchmark for U.S. equity performance.

Many trillions of passive dollars are invested in products that track the S&P 500. The SPDR S&P 500 ETF Trust (SPY), the largest exchange-traded fund (ETF) in the world, has $500 billion in assets under management all by itself. Hundreds of funds and ETFs now have to pick up shares in SMCI and DECK.

Meanwhile, over at DECK, the footwear and apparel company probably best known for the Uggs and Teva brands will replace Zions Bancorporation (ZION) in the S&P 500 on March 18. DECK stock enjoyed a more modest pop of 2.6% on the announcement, but then such is the difference in sentiment between the growth prospects for general AI and shoes.

SMCI and DECK became eligible for inclusion to the S&P 500 in part because of their respective soaring market capitalizations. In addition to a bunch of other criteria, a stock must have a minimum market value of $14.6 billion to join the benchmark index. 

By that metric, SMCI has been eligible for inclusion for some time, but the stock didn't definitively vault past the $15 billion mark until mid-January. Cut to today and Super Micro sports a market value in excess of $64 billion – larger than fellow S&P 500 stock PayPal (PYPL).

Deckers Outdoor stock, which has more than doubled over the past 52 weeks, crossed the $15 billion mark back in October. DECK's current market value is more than $23 billion. 

As for Whirlpool and Zion Bancorporation, they will replace Super Micro Computer and Deckers Outdoor in the S&P MidCap 400, respectively, said S&P Dow Jones Indices.

Analysts' takes on SMCI and DECK

Being included in the S&P 500 is not an endorsement by the editors of the index to buy the stock. Rather, the stocks in question have merely met the criteria and are deemed better fits than the ones kicked down into the midcap index.

So let's see what industry analysts have to say about these soon-to-be S&P 500 names.

Of the 15 analysts issuing opinions on Super Micro stock surveyed by S&P Global Market Intelligence, seven rate it at Strong Buy, three say Buy, four have it at Hold and one calls it a Strong Sell. That works out to a consensus recommendation of Buy, albeit with mixed conviction.

Goldman Sachs initiated coverage of SMCI on Monday with a Neutral rating (the equivalent of Hold) and a price target of $941. Wall Street's average price target stands at $795.04, giving Super Micro stock implied price downside of about 30% in the next 12 months or so. 

"SMCI is very well positioned to serve demand from AI [cloud service providers] over the next few years, but serving enterprise AI infrastructure demand in the years after likely will be more competitive, particularly given more enterprise-focused IT hardware suppliers such as Dell (DELL) and Cisco Systems (CSCO)," analyst Michael Ng wrote in a note to clients. 

Analysts are actually more bullish on the far more boring Deckers Outdoor. Of the 21 analysts covering DECK, 12 rate it at Strong Buy, seven say Buy and two call it a Hold. That works out to a consensus recommendation of Buy, with high conviction. 

That said, the Street's average target price on DECK gives the stock essentially no implied price upside in the next year or so. 

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If you're a long-time shareholder in Walmart (WMT) stock wondering why the world's largest retailer effected a three-for-one stock split near the end of February, well, the move wasn't for you. It was for Walmart's employees. 

After all, investors don't need stock splits anymore – not in a world where they can buy fractional shares for free on their smartphones. But Walmart, like a lot of companies, has a program where its employees can buy shares through payroll deductions. The issue? WMT's price was getting a little too rich for the program to work as intended.

After rising almost 18% on a price basis over the past 52 weeks, Walmart stock is trading at record levels. Indeed, at about $174 a pop, WMT stock stands 20% above its three-year average price of $145. Regrettably, the stock's high-flying ways put it out of reach for some.

"[Founder] Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates," said Walmart CEO Doug McMillon in a press release.

The solution? A three-for-one stock split ahead of the open on February 26. Recall that as much as the market likes stock splits, they're essentially immaterial. Nothing about a company's fundamentals or outlook changes. A stock split is like making change. I give you two $10s for a $20.

In Walmart's case, shareholders get three shares for every share held – and that could make a big difference to Walmart employees. That's because the company provides a 15% match on the first $1,800 invested each year by eligible associates. 

Walmart's company match works out to $270 – or not even enough to buy two full shares pre-split. After the split, however, that $270 match will buy more than four full shares of this blue chip stock. 

What it means for WMT investors

Not much. As noted above, stock splits get the market excited for maybe a minute, but they are meaningless. The arithmetic changes, but the fundamentals don't. 

For example, Walmart’s outstanding common stock will grow to approximately 8.1 billion from 2.7 billion shares. At the same time, the dividend per share will drop by two-thirds. Walmart, a member of the S&P 500 Dividend Aristocrats, just hiked its payout for a 51st consecutive year. For fiscal 2025, shareholders will receive an annual cash dividend of 83 cents a share on a post-split basis. That's down from $2.49 on a pre-split basis, but shareholders will own three times as many shares. 

If there's anything interesting about WMT's stock split, it's that it will greatly reduce the name's weight in the Dow. Unlike the S&P 500, which is weighted by market capitalization, the Dow is weighted by price. Pre-split, Walmart is the 17th most important Dow Jones stock with a 3% weight in the index. Post-split, WMT will drop to 26th place with a weight of 1%. 

Interestingly, Amazon.com (AMZN) will join the Dow at the beginning of trading next week. It will slot into the place formerly held by Walmart and its roughly 3% weighting in blue chip index.

AMZN has been one of the best stocks of the past 30 years, and anyone who put $1,000 into Amazon stock a couple of decades ago has done even better. Sadly, Walmart has been a market laggard over the last 20 years. 

If past is prologue, more AMZN and less WMT in the Dow will be good for this bluest of blue-chip market benchmarks. 

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The Dow Jones Industrial Average hasn't had a makeover in almost four years, and this time, it's a doozy. Amazon.com (AMZN) will replace Walgreens Boots Alliance (WBA) in the elite 30-component index before markets open on February 26, S&P Dow Jones Indices said in a press release late Tuesday. 

Not that anyone should be too surprised. The keepers of the Dow have long been under pressure to elevate Amazon to the blue-chip barometer. Not only is it the largest e-commerce company in the U.S., but it's also the market leader in cloud services. And then there's Amazon's presence in the analog world, which includes freight & logistics operations and the Whole Foods grocery chain, among other endeavors.

Most important, there's the little fact that Amazon stock has been one for the ages. Anyone who put $1,000 into AMZN stock a couple of decades ago would be delighted with the results today. But that's just what Amazon does over the long term. Between its initial public offering in 1997 and December 2020, Amazon stock created nearly $1.6 trillion in wealth for shareholders, making it one of the 30 best stocks since 1990. 

Why is Amazon replacing Walgreens in the Dow?

Shareholders in Walgreens, on the other hand, probably should have seen this coming. The pharmacy chain slashed its dividend in January by almost half to redirect cash back into the business. WBA stock is also long-time market laggard. Indeed, Wall Street analysts have had a consensus Hold call on shares for years, routinely ranking WBA low on their list of best Dow Jones stocks. 

The final nail in the WBA coffin, however, was its ever-shrinking share price. At around $21, WBA goes for roughly half the next-cheapest Dow stock, Verizon (VZ), at $40. The most expensive Dow Jones stock is UnitedHealth Group (UNH) at $520.

These wide price gaps are a problem because while the S&P 500 is weighted by market capitalization, the Dow is weighted by share price. WBA was begging to be replaced, if only because its low share price made it almost immaterial to the direction of the Dow.

Amazon stock is a much better fit in this regard. At about $169 a share, Amazon's weight in the Dow will land at 17 out of 30, or roughly 2.8%. For comparison's sake, AMZN stock's weighting in the S&P 500 stands at 3.7%.

Although the Dow will start out being underweight Amazon, that's better than having no exposure to one of the most important companies in the U.S. economy. Amazon is also a good fit for the Dow in that although we think of it as a tech name, it's actually part of the consumer discretionary sector. Swapping Amazon in for Walgreens, a consumer staples stock, doesn't technically increase the Dow's weighting in the IT sector.

Neither does the swap much affect the Dow's dividend profile. "Amazon.com joins Boeing (BA) and Salesforce (CRM) as the only non-dividend paying issues in the DJIA (Walgreens paid a dividend)," notes Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. But, at 1.93%, the Dow retains its higher projected dividend yield over the S&P 500 (1.41%), Silverblatt adds. 

The bottom line

Being tapped for the Dow is more about prestige than fund flows. The S&P 500 is the most commonly used benchmark for U.S. stock performance, not the Dow. That's why Amazon stock, with a market value of more than $1.7 trillion, took the news of being tapped for the blue-chip barometer in stride Wednesday. 

But, if nothing else, bringing Amazon into the Dow seems long overdue. As for Walgreens, WBA's tough start to 2024 hasn't been good for anyone following the Dogs of the Dow. Management is trying to turn things around. Analysts say it will be a multi-year process. 

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Shopping for stocks when markets are struggling with a June swoon might not seem like the best idea. Between rising bubble anxiety and mounting uncertainty over the direction of monetary policy, it's understandable if investors are reluctant to put cash to work these days.

On the other hand, markets rarely top out at this time of year. As Ryan Detrick, chief market strategist at Carson Group notes, the most recent all-time high for the S&P 500 was on June 2.

"Stocks soared for the two months off the late March lows, so some weakness in June isn't a big surprise," he writes. "June is the only month in history that hasn't seen the ultimate peak for the year. We don't think this year will be the first one to peak in June."

At the same time, not only has a strong corporate earnings season lifted sentiment, but forward earnings estimates are marching higher. In turn, rising expected operating profits have helped make valuations more attractive.

Besides, every market features select names that are set to outperform.

Although the Magnificent 7 stocks have done much of the bull market's heavy lifting, that hardly means these names are doomed to underperform from here. Indeed, many of them are in pronounced drawdowns. At the same time, a rotation out of these stocks has capital flowing to other, sometimes sleepier, sectors.

As we'll see below, five of Wall Street's top-rated S&P 500 stocks to buy hail from the Magnificent 7. Companies from the financial, healthcare and industrials sectors are ably represented, too.

How we found analysts' top-rated S&P 500 stocks

It's well known that industry analysts are reluctant to slap Sell ratings on the names they cover. There are several reasons for this, some more defensible than others.

What's less commonly understood is that Strong Buy recommendations, while not nearly as rare as Sell calls, are in somewhat short supply, too.

If you run a screen of the S&P 500 using data from S&P Global Market Intelligence, you'll see that analysts assign a consensus Sell recommendation to only one stock.

At the other end of the ratings spectrum stands the Street's highest recommendation of Strong Buy. A total of 52 stocks made the cut there as bullish sentiment soars.

First, a note on our methodology: S&P Global Market Intelligence surveys analysts' stock recommendations and scores them on a five-point scale, in which 1.0 equals Strong Buy and 5.0 means Strong Sell.

Any score below 2.5 means that analysts, on average, rate the stock a Buy. The closer the score gets to 1.0, the stronger the Buy call.

In other words, lower scores are better than higher scores.

Have a look at the chart below to see the 52 stocks in the S&P 500 that score an elite Strong Buy recommendation from industry analysts. Investors who fear it's too late to buy Amazon.com (AMZN), Microsoft (MSFT) or Nvidia (NVDA) will be happy to see they easily made the list.

As much as artificial intelligence (AI) is driving capital spending and market sentiment, analysts see plenty of reasons to be bullish on names across multiple sectors. Here we highlight what Wall Street has to say about three less sexy stocks on the list this month.

GE Aerospace

GE Aerospace (GE), which retained the classic GE ticker following the 2024 spinoff of GE Vernova (GEV), has seen its shares take off as the company establishes itself as a high-margin, pure-play aerospace leader with significant competitive moats.

In a report titled "No sign of stopping the growth engine; reiterate Buy," BofA Securities analyst Ronald Epstein said the company's "robust demand and best-in-class execution support double-digit growth in 2026."

The analyst likes the stock over the longer haul, too, noting that GE Aerospace is well-positioned to benefit from the ongoing ramp-up in commercial aircraft production and sustained aftermarket demand. "Following the spin-off of GE Vernova, we see the company as leaner and focused on execution and safety," Epstein added.

Meanwhile, the company's robust free cash flow – which exceeded $5.7 billion last year – allows GE to aggressively fund R&D and investments in manufacturing infrastructure, all while continuing to return cash to shareholders. GE boosted its dividend by nearly 30% last year. At the same time, it repurchased more than $7 billion in stock.

Shares have delivered only market matching returns so far in 2026 (after adding more than 86% last year), but that just has the stock priced for outperformance, Wall Street says. Of the 22 analysts covering GE, 16 rate it at Strong Buy, three say Buy and two call it a Hold. A lone analyst has a sell recommendation on the name. Nevertheless, that works out to a consensus recommendation of Strong Buy.

Smurfit WestRock

After losing about a quarter of their value in 2025, Smurfit WestRock (SW) shares are beating the broader market by about 4 percentage points this year, and bulls say they are just getting started. After all, the company is still finding its feet.

SW was formed by the 2024 merger of Smurfit Kappa and WestRock Company, creating the world's largest paper packaging company. Smurfit WestRock's operations in 40 countries make it the revenue leader in the world of corrugated cardboard, containerboard, consumer packaging and more.

"We see long-term upside potential and expect earnings growth congruent with growth in e-commerce and growth in demand for sustainable paper and packaging goods," writes Argus Research analyst Alexandra Yates, who rates shares at Buy. "We also expect to see margin growth with operational efficiency improvements in the coming quarters."

Moreover, SW expects $400 million in synergies (also known as cost cuts) as a result of the merger.

With a forward P/E of less than 14, SW trades at 36% discount to the broader market. The dividend yield, at 4.2%, is pretty spicy compared to the S&P 500's yield of less than 1.1%.

Of the 15 analysts covering the materials stock, 10 rate it at Strong Buy and five have it at Buy. That works out to a consensus recommendation of Strong Buy.

Visa

Warren Buffett was a long-time admirer of Visa (V), so it was something of a surprise to see CEO Greg Abel boot it from the Berkshire Hathaway equity portfolio in early 2026.

Happily for continuing shareholders, Wall Street remains bullish on the nation's largest payments processor. Shares are off about 6% over the past year – vs a 26% gain for the broader market – but that just has Visa priced for outperformance amid the relentless war on cash, bulls say.

"Visa remains well positioned to benefit from the ongoing shift to electronic payments and remains one of our top ideas," writes Oppenheimer analyst Rayna Kumar, who rates shares at Outperform (Buy).

The company is enjoying massive growth in value-added services, such as fraud protection, consulting and data analytics. Not only are these high-margin services; they create higher switching costs for banks and merchants. This stickiness helps Visa hold a dominant position in the business-to-business space.

Interestingly, the Street hasn't been this collectively bullish on the name in 16 years. Of the 39 analysts covering Visa, 29 rate it at Strong Buy, seven say Buy and three have it at Hold.

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Wall Street's top strategists collectively forecast another year of gains for the S&P 500, albeit a much more muted one. That's to be expected after the benchmark index gained more than fifth on a price basis in 2023.

Wall Street's average target on the index gives the S&P 500 implied upside of about 5% from current levels. At the high end, Capital Economics forecasts the benchmark index to hit 5,500 by the end of 2024, giving the S&P 500 implied price upside of about 15% next year. At the low end, JPMorgan Chase expects the index to retreat 12% to 4,200 in 2024. 

Passive investors will go along for the ride no matter where it takes them. Stock pickers, on the other hand, seek to beat their benchmarks, and that's where Wall Street's S&P 500 stocks with the most upside come in. 

Analysts base their Buy, Hold or Sell recommendations on how they expect a stock to perform relative to the S&P 500 over the next 12 months or so. To do so, they plug numbers into discounted cash flow models. These models spit out price targets, which tell them where the stock should be trading in a year. The difference between the stock's current price and its target is called its implied, or potential, upside. Analysts' average price targets tell you how the Street collectively expects a stock to perform.

While you can hardly base a stock-picking strategy on the sole criterion of price targets, it can be helpful to know which S&P 500 stocks are expected to deliver the biggest returns in the year ahead. To that end, we used S&P Global Market Intelligence to screen the S&P 500 for the index members with the highest implied upside for 2024 and beyond. 

Have a look at the table below to see the 10 S&P 500 stocks analysts expect to put up the biggest price gains in 2024. (Price targets and other data are as of December 22.)

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The Dogs of the Dow is an investing strategy where income investors essentially bet on beaten-down blue chip dividend stocks in the Dow Jones Industrial Average. 

First popularized in the early 1990s, the Dogs of the Dow is supposed to deliver superior risk-adjusted returns vs the DJIA. Although the Dogs of the Dow has a mixed track record in that regard, at least it's dead simple to follow: buy the 10 Dow stocks with the highest dividend yields in the average at the end of December, and then hold them for one year.

The idea behind the Dogs of the Dow is that investors are using the highest dividend yields as proxies for valuation. Recall that a dividend stock's yield rises as its price falls. The Dow Jones stocks with the highest dividend yields should theoretically be bargains, what with their depressed share prices and all. 

With the end of the year approaching, it's time for followers of the Dogs of the Dow strategy to rebalance their portfolios. Below please find the 10 Dogs of the Dow for 2024, listed by dividend yield as of December 22. 

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Business partners for nearly 50 years and friends for longer, Charlie Munger was probably one of the few people on the planet who felt comfortable telling Warren Buffett, the greatest investor of all time with $120 billion in personal wealth to prove it, that he was wrong. 

Munger, vice chairman of Berkshire Hathaway (BRK.B), died on Nov. 28, just a month shy of his 100th birthday. Already rich by the time he joined Buffett at Berkshire in the mid-70s, Munger possessed the wealth – and had the temperament – to be the opposite of a yes man. And BRK.B shareholders are all very much richer for it.

Just ask Warren Buffett himself. He's the first to admit that he couldn't have done it without Munger, who saved him from many an ill-conceived move. Indeed, Munger shot down his ideas so frequently that Buffett called him the "Abominable No-Man."

Buffett has said that Munger changed his thinking in profound ways, instilling in him a relentless focus for buying "wonderful companies at fair prices, rather than fair companies at wonderful prices."

Munger's upbringing during the Great Depression naturally informed his view of what constituted a good price. As a teenager in the 1930s, he worked in a grocery store for 20 cents an hour. Adjusted for inflation, that's around four-and-a-half bucks an hour today, which is still a terrible wage. Munger said he never intended to get rich. "I wanted to get independent," he explained. "I just overshot!"

Munger: The big money is in the waiting

Already being rich and independent no doubt helped even the playing field for Munger when he agreed to become Buffett's second banana. And for whatever reasons, they always had tremendous chemistry. Buffett's folksy, optimistic style perfectly complemented Munger's acerbic, more skeptical view of things. We'll never know what blunders Munger helped Buffett avoid – or which opportunities only the two, working together, could see and then seize – but suffice to say Berkshire wouldn't be Berkshire without Munger. It follows that Buffett wouldn't be Buffett without Munger, either.

Berkshire Hathaway stock has famously clobbered the broader market for decades. That's why people call Warren Buffett the greatest long-term investor of all time. At Kiplinger, we naturally like to focus on stocks Warren Buffett is buying and selling, as well as the broader Berkshire Hathaway equity portfolio. 

Munger's passing reminds us that Berkshire Hathaway is much more than the value of its stock holdings. 

Buffett is thought to manage about 90% of Berkshire's equity portfolio, with co-managers Ted Weschler and Todd Combs handling the remaining 10%. Presumably Buffett consulted Munger when handling his end of the portfolio, but it's important to remember roughly half of the company's value stems from its scores and scores of wholly owned subsidiaries and other ventures.

These were the deals – the supreme decisions of how to allocate Berkshire's capital – in which having Munger around really paid off. Buying a railway operator for $26 billion, as Berkshire did with BNSF in 2010, is not something anyone should do lightly.

It's also important not to let a massive and growing cash pile tempt you to do something stupid, like overpay for acquisitions. Buffett has bemoaned for years the lack of "whale-sized" acquisition targets, even as Berkshire's cash pile swells. Sitting on the sidelines, while waiting for lower prices, that's Munger's DNA, and it will serve any investor well:

Buy wonderful, well-managed businesses (or stocks in such companies) at great prices – and then have the patience to let these productive businesses (and their share prices) grow. 

As Munger always stressed, "the big money is not in the buying or selling, but in the waiting." 

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When it comes to blue chip stocks that pay dividends and play defense, Walmart's (WMT) reputation is pretty tough to beat.

Indeed, Walmart is indisputably one of the best dividend stocks for dependable dividend growth.

This member of the S&P 500 Dividend Aristocrats has increased its payout annually for more than half a century. For those reasons and more, Walmart ranks as one of analysts' favorite Dow Jones stocks.

Walmart's defensive characteristics certainly came in handy in 2022, as you can see in the chart below. The S&P 500 generated a total return (price change plus dividends) of -18.1%, a historically bad result.

On the other hand, Walmart's total return came to -0.5% – or essentially flat – to beat the broader market by more than 17 percentage points.

The other side of WMT's defensive coin can be seen in its performance during 2023's remarkable rally. While the S&P 500 returned more than 26%, Walmart returned less than 13%.

As for 2026, WMT's defensive characteristics once again proving their worth. Shares have returned 16% so far this year, while the S&P 500 is basically flat. This recent outperformance has helped WMT turn in solid market-beating returns on a 20-year basis.

That's a change in fortune. WMT stock was a long-time laggard following a torrid run in the 1990s, hurt by the market's preference for growth over value, as well as worries about the future of bricks-and-mortar retail.

The bottom line on Walmart stock

Walmart stock was actually one of the best stocks of the 30 years between 1990 and 2020, but as you can see in the chart below, WMT basically traded sideways for the first decade-plus of the 21st century.

Walmart shares went nowhere for a long time, but then that's not necessarily unusual given how far and fast they appreciated during the bubblicious 90s.

Between the beginning of 1997 and the end of 1999, WMT gained more than 500% on a price basis. The broader market didn't quite double over the same span.

Also weighing on WMT during the first decade of the new century was the threat from e-commerce.

Walmart responded by becoming the second-largest e-commerce retailer in the U.S. after Amazon.com (AMZN) – albeit a distant second. Walmart got serious about its digital strategy sometime around 2006, but it took a while for what was regarded as "show-me" story to ultimately prove successful.

Whatever the causes, that lost decade on Walmart's stock chart hurts its long-term results. Over the past 20 years, WMT stock has generated an annualized total return of 13.5% vs 10.8% for the S&P 500.

To get a sense of what this sort of ride looks like on a stock chart over the past two decades, see the chart below.

The chart illustrates the fact that if you invested $1,000 in Walmart stock 20 years ago, today it would be worth about $12,600. The same thousand bucks invested in an S&P 500 ETF would be worth about $7,700 today.

As for its entire history as a publicly traded company, WMT's annualized total return beats the broader market by about 3 percentage points.

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U.S. dividend growth continued its "steady deceleration" during the April through June period to mark a sixth consecutive quarter of slower dividend increases, according to a study by the Janus Henderson Global Dividend Index.

Although the latest data might sound somewhat alarming, note that difficult comparisons against prior-year periods of unusually robust growth are partly to blame for the deceleration in dividend increases. While many of their global counterparts were enacting steep dividend cuts during the pandemic, U.S. companies managed to grow their payouts with "exceptional resilience," writes Ben Lofthouse, head of global equity income at Janus Henderson Investors.

On a headline basis, second-quarter U.S. dividend growth rose 2.6% year-over-year to $148 billion. Excluding lower one-off special dividends, the underlying growth rate came to 4.6% in Q2. While investors certainly would have preferred to see stronger year-over-year dividend growth, the figures still represent a "creditable increase," Janus Henderson reports.

"Notably, 98% of U.S. companies in our index either raised payouts or held them steady, well above the global average," Lofthouse says.

On a global basis, dividends rose 4.9% to a record $568.1 billion in Q2, per Janus Henderson. Underlying growth, which adjusts for lower one-off special dividends and other minor factors, came to 6.3%.

Healthcare leads U.S. dividend growth

Looking at the U.S., companies in the healthcare sector were the biggest contributors to second-quarter dividend growth, led by Eli Lilly (LLY) and UnitedHealth Group (UNH). UNH happens to be Wall Street's top-rated name among all 30 Dow Jones stocks. 

U.S. real estate companies also helped boost domestic dividend growth, with logistics property specialist Prologis (PLD) being the sector standout. Real estate investment trusts, or REITs, are especially valued by equity income investors for their typically generous disbursements.

Pulling in the other direction on U.S. dividend growth were Intel (INTC) and Blackstone (BX), both of which cut their dividends in bids to preserve or redirect cash. Intel, a member of the Dow, may have returned to profitability in Q2, but this blue chip stock has been a poor investment over the past 20 years. 

Although economic growth around the world is moderating amid higher interest rates, Janus Henderson expects dividend growth to continue in 2023. 

"One of the reassuring features of dividend income is that it is typically much less volatile than earnings," Lofthouse adds. "Payouts lagged behind profit growth last year and so can therefore exceed it this year."

For all of 2023, Janus Henderson forecasts global dividends to increase 5.2% on a headline basis to $1.64 billion. Underlying growth is expected to hit 5.0% vs 2022. 

While accelerating dividend increases would be the preferable state of affairs, the data remain indisputably good news for buy-and-hold dividend growth investors. Shares in companies that raise their payouts like clockwork decade after decade can produce superior total returns (price change plus dividends) over the long run, even if they sport apparently ho-hum yields to begin with. 

Fears of an economic slowdown or outright recession are likely to keep a lid on the rate of dividend growth for the foreseeable future. Be that as it may, loads of stocks can be counted on to hike their dividends regardless of economic conditions. Investors looking to add such names to their portfolios will find plenty of candidates among the best dividend stocks for dependable dividend growth. 

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Shares of AT&T (T) and Verizon Communications (VZ) sport two of the highest dividend yields in the S&P 500, and that's making some equity income investors increasingly nervous. 

The reason being that the dividend yields on these telecommunications stocks are unusually elevated because their share prices are in the dumps.

Recall that stock prices and dividend yields move in opposite directions. It's possible that a too-good-to-be-true dividend yield is simply a side effect of a stock having lost a lot of value. And anytime a company's stock is slumping badly, it's worth wondering if its dividend is sustainable at current levels.

AT&T and Verizon, the latter being one of the Dow Jones stocks, are historically dividend stalwarts. But with their share prices under duress, worries about dividend cuts are to be expected.

Both companies are contending with concerns about increased competition in wireless and slower industry growth, but the issue most punishing their shares these days are concerns over costs related to lead contamination cleanup. 

An investigation by The Wall Street Journal published in July found that "AT&T, Verizon and other telecom giants have left behind a sprawling network of cables covered in toxic lead that stretches across the U.S."

Costs associated with any cleanup could have ramifications for AT&T and VZ's free cash flow (FCF), or the cash remaining after expenses, capital expenditures and financial commitments have been met. Dividends are ultimately supported by free cash flow.

AT&T, VZ dividends look safe

AT&T stock has lost about a fifth of its value for the year-to-date, pushing up the yield on its dividend to 7.8%. As for VZ, shares are off about 12% for the year-to-date, also lifting its dividend yield to around 7.8%.

In what should come as a relief to investors, analysts say the selloffs on lead contamination fears are overdone. Perhaps more importantly, the dividends look safe.

Citi analyst Michael Rollins this week raised his recommendations on both AT&T and Verizon to Buy from Neutral (the equivalent of Hold). He also maintained his "High Risk" rating on both stocks. Rollins argues that T and VZ could become turnaround stories if the costs associated with lead cleanup are lower than expected. 

"Market capitalizations for the telcos with possible [lead contamination] exposure are down $21 billion vs an estimated $15 billion cost of remediation based on latest disclosures and our estimates," Rollins wrote in a note to clients. 

Rollins' calculations suggest the costs of cleanup have been more than adequately discounted in the sectors' valuation. AT&T and VZ could also get a boost if the competitive environment stabilizes, the analyst adds.

At AT&T, shareholders can take additional comfort in the fact that the company has been chipping away at its heavy debt load and freeing up cash. AT&T generated positive free cash flow of $103.4 billion in 2022. That compares favorably against negative free cash flow of $67.7 billion the previous year. 

Over at Verizon, the company generated free cash flow of $11.5 billion for the 12 months ended June 30, 2023. That was after disbursing $10.9 billion in dividends.

Buy, sell or hold?

For the record, analysts as a group aren't quite as bullish as Citi's Rollins. 

Of the 29 analysts covering AT&T tracked by S&P Global Market Intelligence, 10 call it a Strong Buy, two have it at Buy, 15 say it's a Hold and two rate it at Strong Sell. That works out to a consensus recommendation of Buy, with tepid conviction. 

As for VZ stock's prospects for beating the market over the next 12 to 18 months, Wall Street is split. Analysts' consensus recommendation stands at Hold.

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After rising more than 20% in both 2023 and 2024, the S&P 500 Index added another 18% in 2025. But rising volatility during the first quarter of 2026 has investors wondering whether the bull market is intact.

Indeed, recent price action and the market's "fear index" rising well outside its normal range again is a good reminder to be ready for anything. That includes allocating some space in your portfolio for defensive stocks.

In his groundbreaking book on value investing, "The Intelligent Investor," Benjamin Graham discusses the primary characteristics of defensive stocks.

Such stocks have good records of paying dividends, are conservatively financed and are moderately priced. These factors mean defensive stocks are well equipped to ride the inevitable ups and downs of the stock market.

Those same factors also mean defensive stocks can generate stable returns, generous income and long-term wealth for you.

What are defensive stocks in the stock market?

The typical defensive stock has three defining characteristics.

These include a good history of dependable dividend growth; a conservatively financed balance sheet with little debt; and an inexpensive valuation.

Dividends. Companies that have a long history of dividend payments and have grown them over time tend to have stable price histories.

For example, the best dividend stocks for dependable dividend growth tend to fall less in bear markets. This works if the market believes the company will maintain the dividend, even while other stocks are tumbling.

Let's say that a stock has a stable history of dividend payments over an extended period of time. Also, let's assume the stock presently has an attractive dividend yield of 3.5%.

If its dividend payment rises by 5%, the market will tend to push the stock price higher by 5%, so as to maintain the same 3.5% dividend yield.

There is a more fundamental point about dividend-paying stocks that makes them defensive investments.

Companies normally can only pay dividends over a long period if they have positive earnings or strong free cash flow (FCF).

FCF is the money left over after expenses, interest on debt, taxes and long-term investments that are needed to grow the business have been paid.

In other words, they are fundamentally healthy.

At the same time, the best defensive stocks typically have low payout ratios. This means that no more than 50% to 60% of the company's earnings are paid as dividends.

This allows the company to reinvest its retained earnings for future growth.

Balance sheet. Another major trait of a good defensive stock pick is a conservative balance sheet. This means investors should stay away from certain types of stocks with the highest dividend yields.

Their share prices could be spiraling, making their yields rise and/or fall because they may have taken on large amounts of debt in order to pay out their dividends.

Another pitfall to avoid is a company that has issued too many shares. For example, some high-yield real estate investment trusts (REITs) can only afford their lofty dividends by constantly issuing new shares.

So, despite the high yield, the stock will not tend to do well over time.

Valuation. The third major characteristic of top defensive stocks is a cheap valuation.

Academic studies have shown that over long periods, stocks with low price-to-earnings (P/E) ratios and low price-to-book value (P/B) ratios do well over time.

What are drawbacks to buying defensive stocks? 

One drawback of buying even the best defensive stocks is that they tend to generate conservative returns. They typically won't rise as much as other stocks during bull markets.

Of course, the opposite side is also true — they tend to not fall as much in bear markets.

Another drawback is that defensive stocks tend to be either in cyclical industries or low-growth arenas that aren't popular. The company might be profitable, but its earnings or sales growth rate could also be low.

And that is the conundrum for investors. The stock has an inexpensive valuation because of its defensive traits.

But it could be a cheap stock due to its slow growth rate, despite its stable dividends and conservative balance sheet.

What are examples of defensive stocks? 

Here are a few examples of defensive stocks in today's market.

Old Republic International (ORI) is a large multiline insurance company that has a 45-year history of annual dividend growth. And its dividends account for less than 40% of earnings.

Meanwhile, ORI stock has an inexpensive valuation of 12.7 times forward earnings, boasts a 2.9% dividend yield and has a conservatively financed balance sheet.

Chevron (CVX) is a very large oil and gas company that reported revenue of $189 billion and free cash flow of $17 billion for fiscal 2025.

That FCF allows the company to pay an ample dividend, which has grown every year for the past 39 years.

As it stands, the blue chip stock now has an attractive 3.8% dividend yield. Its valuation is also attractive at 20.9 times forward earnings.

And Chevron finances its operations very conservatively, with just 14.4% net debt compared to its shareholders' equity.

HP (HPQ) is a profitable imaging and printing products company that offers related technology solutions and services. HPQ is a defensive stock for several reasons.

First, the company has a history of paying a dividend that traces back more than 50 years. And HP has raised its payout each of the past 15 years. Second, its valuation is attractive, with the tech stock trading at just 6.2 times forward earnings.

And HPQ is considered a defensive stock as its balance sheet is reasonably financed.

It ended 2025 with $4.2 billion in cash. This can be used to cover its dividends and continue to pay down the $8.8 billion of net debt on its balance sheet.

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Warren Buffett's Berkshire Hathaway (BRK.B) initiated a small stake in The New York Times Company (NYT) in the fourth quarter but continued to pare back bets on core holdings such as Apple (AAPL) and Bank of America (BAC).

Buffett, who stepped down as CEO at the end of 2025 but remains chairman of the holding company, continued to cut Berkshire's exposure to equities as the market hit record highs.

In what was perhaps a nod to stretched valuations, Berkshire was once again a net seller of stocks, with net sales of approximately $4 billion in Q4. The holding company has now sold more stocks than it has bought for 13 consecutive quarters.

While exact figures will have to wait until Berkshire releases quarterly earnings on February 28, it's estimated that the company was a net seller of stocks to the tune of $14 billion in 2025.

Over the past three years, Berkshire sold more than $190 billion worth of equities. Also noteworthy is that Berkshire hasn't bought back its own stock since May 2024.

With a market cap of more than $1 trillion, Berkshire maintains a sort of "barbell" portfolio, as it holds approximately $280 billion in stocks and more than $380 billion in cash.

Although Berkshire has become more cautious, it did do some shopping in Q4. In addition to buying NYT, the holding company increased stakes in four of its holdings.

Before we get into Berkshire's most recent buys and sells, it's important to know that Buffett has always run a highly concentrated portfolio.

Excluding the company's Japanese brokerage stocks and other overseas equities, Apple alone accounts for more than a fifth of Berkshire's stock portfolio. (That's down from more than 40% at its peak.)

Furthermore, Berkshire's top five U.S. equity holdings comprise about 70% of its portfolio value, while the top 10 account for 88%.

As Buffett likes to say, diversification is for those who don't know what they're doing.

Also, please note that while Warren Buffett traditionally managed Berkshire Hathaway's largest equity positions, the management structure has officially transitioned.

Buffett has confirmed that CEO Greg Abel now oversees the entire portfolio, supported by investment manager Ted Weschler. Notably, Todd Combs – who previously managed a portion of the portfolio alongside Weschler – departed in late 2025 to take a role at JPMorgan Chase (JPM).

Stocks Warren Buffett is buying

Berkshire boosted its biggest bet in the energy sector, increasing its stake in Chevron (CVX) by almost 7%, or more than 8 million shares. Berkshire, which has owned the Buy-rated Dow Jones stock since the fourth quarter of 2020, now owns more than 130 million shares worth $19.8 billion as of the end of Q4. With a weight of more than 7% in the portfolio, CVX is Berkshire's fifth-largest holding.

In a boost of confidence for Chubb (CB), Berkshire once again upped its stake in the insurer. The holding company, which first bought CB in the first quarter of 2024, increased its position by more than 9%, or almost 3 million shares. With a market value of $10.7 billion as of December 31, CB remains the eighth-largest Berkshire Hathaway holding.

Elsewhere, Berkshire made minor additions to four of its smaller holdings.

Berkshire continued to add to its investment in Domino's Pizza (DPZ), which it initiated in the third quarter of 2024. The holding company increased its stake by more than 12% and now owns nearly 3.4 million shares in the pizza chain worth $1.4 billion as of the end of Q4. However, with a weight of 0.5% in the portfolio, DPZ is Berkshire's 20th-largest position.

As noted above, Berkshire initiated a small stake in NYT, purchasing 5 million shares worth $352 million at the end of Q4. With a weight of about 0.1%, the stake is Berkshire's 30th-largest position.

Lastly, Berkshire made an incremental and essentially immaterial additional investment in Lamar Advertising (LAMR). With a market value of $152 million, LAMR accounts for less than 0.1% of the portfolio.

Stocks Warren Buffett is selling

Buffett continued to pare back Berkshire's position in Apple, which, as recently as 2024, accounted for roughly 40% of its U.S. holdings. The company sold more than 10 million shares over the course of the fourth quarter – a 4% reduction – but Buffett has hardly lost faith in the iPhone maker.

With nearly 228 million shares worth $62 billion as of December 31, AAPL remains Berkshire's largest holding by far, accounting for nearly 23% of the portfolio's total value.

In another reprise from previous quarters, Buffett once again sold Bank of America stock, which has been a major holding since 2017. Berkshire reduced its investment in the nation's second-largest bank by assets by another 9% in Q4, selling more than 50 million shares.

With 517 million shares worth more than $28 billion as of December 31, BAC is Berkshire's third-largest holding, accounting for more than 10% of the portfolio value.

In other sales, Berkshire continued to ease up on DaVita (DVA), its 11th-largest holding, but only by 1.3%. The company also reduced exposure to Constellation Brands (STZ), a stake it initiated at the end of 2024, by 3%.

Other stocks Berkshire pared its stakes in included Aon (AON), Pool Corp. (POOL), Liberty Latin America Class A (LILA) and Atlanta Braves Holdings (BATRK).

Interestingly, Berkshire's most significant reduction in percentage terms was its stake in Amazon.com (AMZN). The conglomerate cut its position by 77%, offloading nearly 8 million shares of the Magnificent 7 stock. With a market value of approximately $525 million, Amazon has tumbled from Berkshire's 17th-largest holding at the end of Q3 to its 27th-largest position as of year-end 2025.

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Imagine a company that's enjoyed overwhelming success in its key markets for ages and also claims one of the most valuable and recognizable brands in the world.

This company was so important to both its sector and the broader economy that it was a component of the Dow Jones Industrial Average for nearly a quarter of a century.

One would expect this blue chip stock to have been an outstanding buy-and-hold bet. To be fair, for a good long while, it was.

That was then. This is now.

Unfortunately, the former Dow Jones stock we're talking about is Intel (INTC).

Shares almost doubled in 2023, helped by a multibillion-dollar cost-cutting campaign and the generalized euphoria surrounding all things artificial intelligence (AI). Intel bulls harbored hopes that the year marked an inflection point for the long-time market laggard.

It hasn't worked out that way. Intel fell as much as 60% from its late 2023 peak before climbing back to about breakeven today. Heck, shares remain about 33% below their all-time high.

It's hard to believe now, but once upon a time, INTC was one of the best stocks on the planet. Cut to the present, and it's not clear if the company can reclaim its glory days.

Intel still dominates the markets for central processing units (CPUs) for PCs and servers, but it's been losing share to rivals at an accelerating rate for some time. Nvidia (NVDA) and Advanced Micro Devices (AMD) are just a couple of its formidable competitors.

Where the semiconductor company really went wrong — apart from execution missteps and manufacturing delays — is the way it missed some of the biggest changes in technology. Intel famously whiffed on mobile, and now Nvidia is running away in generative AI.

There's a reason Nvidia replaced Intel in the Dow Jones Industrial Average in 2024.

It's been a curious ride for INTC investors. Thanks to its dot-com era heyday, Intel was one of the 30 best stocks in the world from 1990 to 2020.

In those three decades, INTC stock generated more than $340 billion in wealth for shareholders, or an annualized dollar-weighted return of 16%, says Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.

However, the past two decades of that 30-year span have been another story.

The bottom line on Intel stock?

If you go all the way back to Intel's debut in the early 1970s as a publicly traded company, it beats the broader market handily. The chipmaker's annualized all-time total return stands at 14.4%. The S&P 500's annualized total return comes to 10.8% in the same span.

If you look at pretty much any other standardized period, an investment in INTC has been a major dud.

Intel stock trails the broader market by distressingly wide margins in the past five-, 10- and 20-year periods. Indeed, its five-year annualized total return is negative.

What does this sort of performance look like on a brokerage statement? Nothing short of ugly.

Have a look at the above chart, and you'll see that if you invested $1,000 in Intel stock 20 years ago, today your stake would be worth about $4,000, or an annualized total return of 7.4%.

The same amount invested in the S&P 500 would theoretically be worth about $7,000 today. That's good for an annualized total return of 11%.

As illustrious and iconic as the Intel brand might be, Intel stock has been nothing but a sinkhole of opportunity cost for buy-and-hold investors for a very long time.

So where does INTC stock go from here? Wall Street is mostly sitting on the sidelines, giving it a consensus recommendation of Hold. Of the 47 analysts covering Intel surveyed by S&P Global Market Intelligence, eight call it a Strong Buy, one says Buy and 32 have it at Hold. Four analysts rate INTC at Sell, while two say it's a Strong Sell.

Among their worries: the company is in the midst of a major restructuring as it struggles to right its floundering foundry business. True, the federal government took a 10% equity stake in 2025, and that's given INTC stock a boost. However, the foundry business continues to generate operating losses and is having difficulty lining up outside customers, among other issues.

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Few companies are more closely associated with the rise and dominance of the American technology industry over the course of the 20th century than International Business Machines (IBM).

The company that came to be known as Big Blue is sort of the O.G. of big tech stocks. IBM, founded before World War I, became the industry leader in pretty much every market it entered, from early punch-card tabulating systems to electric typewriters to mainframe and personal computers.

IBM stock was a fantastic buy-and-hold bet over those many decades. From 1926 to December 2019, IBM created $525.9 billion in shareholder wealth, according to research by Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.

Only seven U.S. stocks generated better returns for shareholders over that span.

Times change. IBM ceded ground to any number of peers, including some of the Magnificent 7 stocks sporting multitrillion-dollar market caps today. The result? Shares in this long-time Dow Jones stock have been a major disappointment for decades.

As a member of the S&P 500 Dividend Aristocrats, IBM is a top-notch name for dependable dividend growth. Not only has the company paid consecutive quarterly dividends since 1916, it has increased its payout annually for 30 years and counting.

However, even after factoring in those reliable and rising dividends, IBM stock has been a market laggard over the long haul.

The bottom line on IBM stock?

IBM stock has been mounting a comeback over the past few years, but as a truly long-term holding, it's been a serious market laggard.

Here's the breakdown: IBM stock's all-time annualized total return (price change plus dividends) comes to 4.6%. The S&P 500 generated an annualized total return of 10.8% over the same span.

It doesn't end there. Shares in the tech giant beat the broader market on an annualized total return basis in the past three- and five-year periods, but lag badly over longer time frames.

It should come as no surprise that if you invested a grand in IBM stock a couple of decades ago, you would be deeply disappointed by the results today.

Have a look at the above chart, and you'll see that if you put $1,000 into IBM stock 20 years ago, it would be worth about $5,700 today. That's good for an annualized total return of 9.1%.

The same sum socked away into an S&P 500 index fund over the past two decades would be worth almost $8,300 today, or 10.9% annualized.

The bottom line? Big Blue has been a buy-and-hold bust in the 21st century.

As for where IBM stock goes from here, Wall Street is cautiously bullish on the name. Of the 22 analysts covering the stock surveyed by S&P Global Market Intelligence, 10 call it a Strong Buy, two say Buy, eight have it at Hold, one says Sell and one rates it at Strong Sell. That works out to a consensus recommendation of Buy with mixed conviction.

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Adobe (ADBE) stock was supposed to get a big boost by adding AI to its offerings, and yet so far the transformational technology has only put shares under pressure.

The result? Although truly long-time shareholders are still sitting on market-beating returns, ADBE isn't the same buy-and-hold beast of yore.

While Magnificent 7 stocks such as Nvidia (NVDA) and Microsoft (MSFT) helped the tech-heavy Nasdaq Composite gain 25% over the past 52 weeks, ADBE is down a painful 30%.

It gets worse. Shares lost more than a quarter of their value last year. And while ADBE popped 77% in 2023, it lost more than 40% in 2022. Yikes.

If it's any consolation to restive shareholders, many steps forward and a few steps back is sort of par for the course for volatile ADBE stock.

Much of the recent underperformance can be attributed to competition in generative AI. For years, the company enjoyed a near monopoly in its niche. Its Creative Suite – which includes the likes of Photoshop, Premiere Pro for video editing and Dreamweaver for website design, among others – really had no peer.

But times change. The emergence of Microsoft's (MSFT) Azure and other cloud-based competitors have taken a bite out of Creative Cloud.

True, Adobe's suite of products still commands a market share of more than 60%, but there's no question the company – and its shareholders – have been feeling the heat.

Indeed, ADBE now lags the broader market on an annualized total return basis by more than 20 percentage points over the past three- and five-year periods.

The bottom line on Adobe stock

It wasn't supposed to be like this. After all, Adobe's hot 2023 run was a lot more like what longtime shareholders have come to expect from the large-cap stock.

Have a look at the chart below and you'll see that a $1,000 investment in Adobe stock 20 years ago would today be worth nearly $12,000. The same money invested in the S&P 500 would theoretically have grown to about $8,300.

Although Adobe is maintaining its market-beating ways, the outperformance gap has narrowed alarmingly since shares peaked back in November 2021.

Happily for bulls, Wall Street believes ADBE can one-day reclaim its record high. Of the 40 analysts issuing opinions on Adobe stock surveyed by S&P Global Market Intelligence, 20 rate it at Strong Buy, five call it a Buy, 12 have it at Hold and three say it's a Strong Sell.

That works out to a consensus recommendation of Buy, with solid conviction.

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• If You'd Put $1,000 Into Nvidia Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Apple Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Amazon Stock 20 Years Ago, Here's What You'd Have Today

It looks like value investing is making a comeback. Growth stocks clobbered value for about a decade. In 2020, they beat value by more than 30 percentage points – the widest margin since at least 1927. 

Then, in 2022, growth took a sickening dive. A popular exchange-traded fund linked to a major growth-stock index, iShares S&P 500 Growth (IVW), fell 29.5%. The value-stock equivalent, iShares S&P 500 Value (IVE), dropped as well, but just by 5.4%. (Unless otherwise noted, returns are as of February 28; securities I recommend are in bold.)

Value and growth stocks move in cycles. The 1980s were led by value stocks; the 1990s by growth. Value investing beat growth for seven consecutive years starting in 2000; then growth dominated through 2021. Could this be the start of a new surge for value stocks? If you look back far enough, you might conclude that value never really went away. 

"There is pervasive historical evidence of value stocks outperforming growth stocks." That is the conclusion of a report last year by Dimensional Fund Advisors, an index-investing specialist with about $600 billion under management. From 1927 to 2021, Dimension calculated, value stocks annually returned 4.1 percentage points more than growth stocks, on average. 

That's an enormous difference, but it's no solace to value investors who missed the growth-stock boom, led by giant tech stocks, that followed the last recession. The question is why we should believe that a shift to value is actually at hand. 

Why value stocks?

First, understand the difference between value investing and growth. Value stocks are generally out of favor. They are less flashy, and their profits accumulate less quickly. So investors pay fewer dollars for every dollar of a value stock's earnings, revenues and net assets. 

Growth stocks are well loved by the market, and growth investors like jumping on fast-moving freight trains. Value stocks are underappreciated by the market while growth tends to be overappreciated.

"Over the last decade, low interest rates and a higher appetite for risk have fueled [the outsize] performance of growth," said Tano Santos, a professor of finance at the Columbia Business School, last October. "Now that both things have changed ... investors are required to look more closely at the underlying quality of the business operations of the firm."

Value stocks surface with scrutiny of a company's balance sheet and its ability to withstand competition. Index providers at S&P Dow Jones Indices choose value using three criteria: a low ratio of a stock's price to its earnings (P/E), book value (or net worth on the balance sheet) and revenues. 

FTSE Russell, another large research firm, uses a single criterion, the ratio of price to book value (P/B). Recently, the Russell 1000 Value index, which draws from the 1,000 largest stocks by market capitalization (or price times shares outstanding), had a P/B of 2.5, while the Russell Growth Index had a P/B of 9.6. The average P/E of the Russell Value index was 15.7, compared with 25.9 for the Growth Index. 

Value stocks usually carry higher dividend yields. The Russell Value index sports a yield of 2.2%; Growth, 1%.

The reason that value beats growth in the long run is that value stocks are cheaper when you buy them, and growth stocks don't stay hot forever. In fact, growth doesn't stay growth forever. You may be surprised to learn that right now, three of the six most heavily weighted stocks on the S&P Value index are tech giants: Microsoft (MSFT), at number one; Amazon.com (AMZN); and Meta Platforms (META), the former Facebook. (Microsoft and Amazon are both in S&P's Growth index as well; some stocks can have both qualities.)

I like all of these unlikely value stocks. Meta – the only tech giant in the Russell 1000 Value index (which, remember, uses only P/B as a ticket for admission) – now trades at a P/E of just 16, based on profit projections for 2024 by a consensus of analysts.

The difference in performance between value and growth tells us that buying out-of-favor stocks – in whatever sector – pays more in the long run than buying stocks with which investors are infatuated.

This value creed has been the watchword of the greatest investors in history, notably including Warren Buffett, his mentor Benjamin Graham, John Neff, Donald Yacktman and David Dreman. 

The torch was passed recently to David Booth, the founder of Dimensional Fund Advisors. Three years ago, I quoted him as saying, "The rationale for investing in value stocks is as strong as ever. The less you pay for a stock, the higher your expected return." That first sentence was belied by the terrible relative performance of value the very next year. (Market timing is impossible.) But the second sentence is absolutely correct.

Value investing strategies

So why do growth and value move in cycles? The best explanation is that investors move in packs. Their enthusiasm is contagious but eventually wears out. In addition, just a few huge growth stocks can pull that style train – at least for a while. Then, momentum works in the opposite direction.

Because stocks travel between style categories, the best way to invest in value is through funds, which regularly rebalance their portfolios to take changes into account. In addition to the iShares S&P 500 Value ETF, which carries an expense ratio of 0.18%, you can choose the Vanguard S&P 500 Value (VOOV), with expenses of just 0.1%, or the iShares Russell 1000 Value (IWD) or the Vanguard Russell 1000 Value (VONV), among others.

Another approach is to let smart stock pickers do the selecting. An obvious choice is Berkshire Hathaway (BRK.B), Buffett's holding company, which owns large stakes in such traditional value stocks as Kraft Heinz (KHC), with a dividend yield of 4%, as well as

Coca-Cola (KO), yielding 3.1%, and Chevron (CVX), paying 3.7%. Berkshire has declined just 5% in the past 12 months, compared with a 16% loss for the S&P 500 Growth Index. 

Columbia Select Large Cap Value (CSVZX) has a reasonable expense ratio for a managed mutual fund of 0.54% and an annual average return of 11.3% over the past 10 years, beating the iShares and Russell value index ETFs. The portfolio of 36 stocks includes heavy investments in the insurance giant Cigna Group (CI), yielding 1.7%; Wells Fargo (WFC), 2.6%; and Verizon Communications (VZ), 6.7%. 

Another excellent managed fund is AMG Yacktman Focused (YAFFX), run for the past 20 years by Donald's son Stephen. The low-turnover fund owns such value classics as Johnson & Johnson (JNJ), yielding 2.9%; Procter & Gamble (PG), 2.6%; and PepsiCo (PEP), 2.6%. The drawback is a relatively high expense ratio of 1.25%.

Northern Small Cap Value (NOSGX), with an expense ratio of 1%, specializes in stocks that have been the most unloved of all over the past decade or so. The fund, which has a huge portfolio, has returned an annual average of 8.2% for 10 years. Among the top holdings are Tegna (TGNA), the national media company that used to be called Gannett; Commercial Metals (CMC), a steel fabricator with a P/E based on expected earnings of just 10; and Moog (MOG-A), maker of aerospace controls.

What's remarkable about value is that it not only produces higher returns than growth over the long term but also carries less risk. Using beta (which measures movement of an asset relative to the market overall) as a metric, the S&P 500 Value index is 15% less volatile than the Growth index. 

Although individual value stocks such as the ones I'm recommending are appealing right now, I like the idea of a portfolio balanced between one or two value funds and several growth funds or stocks. I'm not giving up on great growth companies, but now is the time to return to value.

Time for Value to Shine?

The funds below are a good way to invest in value stocks, which are less expensive relative to yardsticks such as book value or earnings and offer attractive yields.

James K. Glassman chairs Glassman Advisory, a public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. Of the stocks mentioned here, he owns Microsoft and Amazon. You can reach him at jkglassman@gmail.com.

The Federal Reserve is in a tricky spot these days as the central bank's rate-setting committee gathers for its next meeting.

On the one hand, economic growth remains solid and inflation remains above the Fed's long-term target. Price pressures could resurface as a result of President Donald Trump's tariff policies.

On the other, the jobs outlook is weakening, and too many folks are priced out of the housing market. Meanwhile, economists, strategists and investors are increasingly concerned about the central bank's independence going forward.

December's CPI report showed that consumer inflation held steady at 2.7%, relieving pressure on the Federal Open Market Committee (FOMC), the Fed's rate-setting panel, to raise rates. We should see further cooling ahead thanks to easier comparisons.

"The 12-month inflation rate for all prices will drop in January through March, but mostly because of strong price increases a year ago raised the base for the year-over-year calculation," writes Kiplinger economist David Payne.

Sluggish hiring, meanwhile, leaves the possibility of future rate cuts on the table.

These twin pulls make the Fed likely to leave the short-term federal funds rate unchanged at its next meeting, experts says.

"Firmer economic growth may be translating into some welcome improvement in labor markets, which should be sufficient to sideline the FOMC at month's end," writes Sal Guatieri, senior economist at BMO Capital Markets. "At the same time, the peak-tariff effect on inflation could be in the rearview mirror, opening the door for more rate cuts this year."

When you consider the Fed's dual mandate against the backdrop of sticky inflation and a softening labor market, it makes sense that folks are obsessed with tracking when the next Fed meeting is coming up.

Lower interest rates today equal higher returns for equities tomorrow.

The next Fed meeting: What to expect

As you can see from the FOMC meeting calendar below, the committee meets eight times a year, or about once every six weeks. The FOMC is required to meet at least four times a year and might convene additional meetings if necessary. The convention of meeting eight times per year dates to the market stresses of 1981.

FOMC meetings last two days and conclude with the committee releasing its policy decision at 2 pm Eastern Standard Time. The Fed chief then holds a press conference at 2:30 pm. (Pro tip: As closely scrutinized as the Fed statement might be, market participants are usually even more keen on what the Fed chair has to say in the press conference.)

As for the next Fed meeting, it will begin on Tuesday, January 27, and conclude with a policy statement on Wednesday, January 28, at 2 pm EST.

As of January 20, interest rate traders assigned a 97% probability to the FOMC leaving the fed funds rate unchanged at a target range of 3.50% to 3.75%, according to CME FedWatch.

That's up from 78% a month ago. The odds of a quarter-point cut stood at 3%, down from 22% last month.

The schedule of upcoming Fed meetings is listed below, courtesy of the FOMC.

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• Kiplinger Economic Forecasts

Apple (AAPL) stock has been in a slump since notching a record high at the end of 2025, but that means little to truly long-term investors.

Recall that at one point last year, AAPL stock lost as much as 30% of its value. Shares soon went on a remarkable run, adding about $1.6 trillion to the company's market cap in only eight months.

Given that context, a 9% drawdown from AAPL's December record is just the cost of doing business. If you want to own equities, volatility is merely the price of admission.

Truly long-term buy-and-hold Apple investors already know this. After all, they've been through these sorts of things many times before – and have been rewarded with incomparable returns over the past few decades.

As famed speculator Jesse Livermore once said, the big money is made by "sitting tight." If any stock proves the wisdom of his words, it's Apple.

From January 1990 through December 2020, AAPL stock created $2.67 trillion in shareholder wealth, or an annualized dollar-weighted return of 23.5%, according to an analysis by Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.

Indeed, per Bessembinder's findings, which account for a stock's increase in market cap adjusted for cash flows in and out of the business and other adjustments, Apple was the best stock in the world over those 30 years.

True, AAPL stock traded sideways for the first few years of the 21st century, but an explosion of innovation soon put an end to that.

Under the visionary leadership of the late Steve Jobs, Apple essentially reinvented itself for the mobile age, launching revolutionary gadgets such as the iPod, MacBook and iPad.

But what really set Apple on its course to becoming the world's third-largest publicly traded company – and one of hedge funds' favorite blue chip stocks – was the 2007 debut of the iPhone.

Today, Apple isn't just a purveyor of gadgets; it sells an entire ecosystem of personal consumer electronics and related services. And it's a sticky ecosystem at that.

No less an eminence than Warren Buffett has called the iPhone maker Berkshire Hathaway's (BRK.B) "third business," noting Apple fans' fantastic brand loyalty as one reason for being all-in on the stock. (Apple accounts for more than fifth of the value of the Berkshire Hathaway equity portfolio.)

True, Berkshire Hathaway cut its Apple stake sharply over the past year, but that was because the holding company believes that corporate taxes are likely to rise at some point in the future. Bulls needn't worry about Berkshire losing its taste for the stock. Warren Buffett adores Apple as much as ever.

Little wonder the iconic tech firm was tapped to become one of the elite 30 Dow Jones stocks. In 2015, Apple replaced AT&T (T) in the Dow Jones Industrial Average.

The bottom line on Apple stock?

Over the past 20 years Apple stock generated an annualized total return (price change plus dividends) of 27.4%. By comparison, the S&P 500 delivered an annualized total return of 10.8% over the same span.

What does that look like on a brokerage statement? Check out the chart below and you'll see that if you invested $1,000 in Apple stock 20 years ago, it would today be worth about $130,000.

The same $1,000 invested in an S&P 500 index fund would theoretically have turned into less than $8,000 over the same period.

For those wondering if Apple stock is a buy at current levels, Wall Street certainly thinks so.

Of the 48 analysts covering AAPL surveyed by S&P Global Market Intelligence, 25 rate it at Strong Buy, six say Buy, 15 have it at Hold, one says it's a Sell and one has it at Strong Sell.

That works out to a consensus recommendation of Buy, with high conviction.

More Stocks of the Past 20 Years

• If You'd Put $1,000 Into Amazon Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Microsoft Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Netflix Stock 20 Years Ago, Here's What You'd Have Today

Nvidia (NVDA) cemented its place as the market's favorite bet on artificial intelligence (AI) three years ago and it shows no signs of letting up.

Indeed, the company has become so important to investors that Nvidia's earnings report helps set the tone for trading for the broader market.

To recap: OpenAI's ChaptGPT kicked off the AI frenzy at the end of 2022. Seemingly insatiable demand on the part of AI hyperscalers for Nvidia's graphics processing units (GPUs) propelled NVDA stock past $1 trillion in market capitalization midway through 2023.

It took only about eight months for yet another blowout quarterly earnings report to push Nvidia stock past the $2 trillion mark.

Cut to early 2024 when Nvidia's over-the-top first-quarter earnings – plus a NVDA stock split and a dividend hike – pushed its market cap past $3 trillion.

As of this writing, Nvidia, which replaced Intel (INTC) in the Dow Jones Industrial Average in late 2024, is the world's largest publicly traded company. Indeed, it became the first company to top $4 trillion in market cap in July 2025. Four months later, Nvidia briefly exceeded $5 trillion in market cap before shares eased back.

But then, long-time shareholders should be used to such outsized rewards and risks by now.

That's because volatility has always been the price of admission to this long-time market beater. True, Nvidia, a highly cyclical semiconductor stock, has vastly outperformed the broader market since going public at the end of the last century.

Quite naturally, it has done so with several vertiginous ups and downs along the way.

After losing half its value in 2022, NVDA stock more than tripled on a price basis in 2023, vs a gain of 24% for the S&P 500.

And as for 2024? Nvidia stock gained more than 170% vs a 25% rise in the broader market. The stock once again led the broader market in 2025, albeit by "only" 21 percentage points.

Nvidia's market-beating ways go much farther back than most folks might know, however. In fact, few stocks have done more for investors over the past few decades than Nvidia.

From its initial public offering at $12 a share in January 1999 through December 2020, NVDA stock created $309.4 billion in shareholder wealth, according to an analysis by Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.

Indeed, per Bessembinder's findings, which account for a stock's increase in market value adjusted for cash flows in and out of the business and other factors, Nvidia was one of the 30 best stocks over that 30-year time frame.

Looked at another way, over its life as a publicly traded company, Nvidia stock generated an annualized total return of 37.1%. The S&P 500, with dividends reinvested, returned an annualized 10.8% over the same period.

Importantly, most of the shareholder wealth generated by Nvidia came over just the past few years. That's because back in the day, the primary market for Nvidia's chips consisted of PC and console video game enthusiasts.

Happily for Nvidia, it just so happens that the company's powerful GPUs and related intellectual property are indispensable to the fields of artificial intelligence, professional visualization, cryptocurrency mining and more.

As noted above, NVDA processors are in demand for use in data centers – and especially data centers that power generative AI. Indeed, the company is struggling to keep up with orders from hyperscalers such as Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN) and Alphabet (GOOGL).

Few blue chip stocks offer so much exposure to so many emerging endeavors, which helps explain NVDA stock's amazing returns over the longer haul. AI has been NVDA's afterburner.

But as remarkable as the company's business may be, it doesn't quite get to the heart of what NVDA stock has meant to long-term shareholders and their brokerage statements. For that, consider the following facts about Nvidia stock.

The bottom line on Nvidia stock?

Over the past two decades, Nvidia stock generated an annualized total return (price change plus dividends) of 37.2%. The S&P 500, by comparison, generated an annualized total return of 10.9% over the same span.

What does that mean in dollar terms? Have a look at the above chart and you'll see that if you invested $1,000 in Nvidia stock 20 years ago, it would today be worth more than $560,000. The same amount invested in an S&P 500 index fund would theoretically be worth not quite $8,000 today.

As for adding to NVDA at current levels, the Street remains bullish even after the stock's incredible run. Indeed, NVDA rates as a top Dow Jones stock to buy.

Of the 63 analysts issuing opinions on Nvidia stock surveyed by S&P Global Market Intelligence, 49 rate it at Strong Buy, 11 say Buy, two call it a Hold and one has it at Strong Sell.

That works out to a rare consensus recommendation of Strong Buy. Indeed, Nvidia ranks among analysts' top S&P 500 stocks to buy now.

Speaking for the bulls, Oppenheimer analyst Rick Schafer says the AI build-out is still in its early days.

"Nvidia has transformed from a graphics company to a premier leading full stack AI solutions platform company," notes the analyst, who rates NVDA at Outperform (the equivalent of Buy.) "Compute continues to chase demand. NVDA ubiquitous AI platform best positioned to win."

Just remember that NVDA is ultimately a chip company, and the semiconductor industry is cyclical. As exciting as the AI build-out may be, Nvidia's growth prospects could still one day change.

More Stocks of the Past 20 Years

• If You'd Put $1,000 Into Microsoft Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Apple Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Walmart Stock 20 Years Ago, Here's What You'd Have Today

In the 45 days between former UK Prime Minister Liz Truss being elected the new leader of the Conservative party and her subsequent resignation announcement, the FTSE 100 lost nearly 5% of its value. 

Year-to-date, the 100 largest companies by market cap on the London Stock Exchange are down nearly 6%. Most of the losses came in the fall due to the now-former Prime Minister’s disastrous mini-budget that provided tax cuts of 45 billion British Pounds ($52.3 billion) for the country’s wealthiest individuals. 

Recently, the UK markets have rallied on news that the other former Prime Minister, Boris Johnson, would not run to be head of the Conservative party and Prime Minister, putting Rishi Sunak in the job.  

The markets feel the former Goldman Sachs analyst is a better choice for the moment. 

Despite the gains, the FTSE 100 is still down nearly 6% over the past five years. This compares to a 49% gain for the S&P 500. In addition, according to Bloomberg Intelligence, the FTSE 100 is trading at 8.7x earnings, its lowest multiple since 2011. 

“It doesn’t just look cheap relative to its own history — it looks cheap relative to other markets too,” Bloomberg contributor John Stepek wrote on Oct. 24. 

“In terms of valuation, the FTSE 100 trades at a discount of around 20% compared to euro-area stocks (as measured by the Stoxx 600 index), and a whopping 45% compared to the S&P 500.”

So the question is: Should U.S. investors be looking to the UK for their next stocks to buy? 

Banks, builders healthcare, telecom look cheap

 Stepek provides four industries where investors might look for beaten-down stocks that will rally in the future: asset management, homebuilders, healthcare, and telecoms. 

However, as Stepek points out when stocks are cheap, they’re cheap for a reason and possibly could get even more affordable, so it makes sense to wait. 

In addition, a big problem with the FTSE 100, according to Russ Mould, Investment Director of UK investment platform AJ Bell, is the type of companies included in the index. 

“[The FTSE 100 earnings] are heavily reliant on the unforecastable (oils, mining, commodities), the indigestible (banks, life-and non-life insurers) and the interminably slow (telcos, utilities, tobacco),” the Financial Times reported Mould’s comments recently.

The Financial Times suggests that about 50% of the valuation discount for the FTSE 100 is due to poor sector composition. The other 50% valuation gap is attributed to the lengthy U.S. bull market and a higher cost of capital for UK companies due to Brexit. 

For many global investors, equities of any kind remain unattractive, so even if the premise that UK stocks are cheap is accurate, there’s little appetite for buying right now. 

For aggressive investors that want to take a chance on the UK market’s cheaper valuation, ETFs such as the Franklin FTSE United Kingdom ETF (FLGB) or the iShares MSCI United Kingdom ETF (EWU) might be the safer bet to make.  

When it comes to buying stocks, there are typically two big-picture strategies you can choose from – growth investing or value investing.

The idea of growth investing largely speaks for itself. Simply put, you invest in companies growing their sales and profits at impressive rates.

But does that mean value investing involves companies that aren't growing? And how is this strategy better or worse?

If you're wondering what value investing is, you're not alone. Thankfully, the basics are pretty easy to understand, even for novice investors.

What is value investing? 

Value investing doesn't mean you're buying a stock that has zero growth. It just means that growth isn't the main appeal. Instead, you're investing in a company that is likely to be underpriced and overlooked when compared with its flashier rivals.

Maybe the value stock in question isn't seeing massive expansion, rather it delivers a predictable stream of earnings and pays consistent dividends as it hums along. Or maybe the company has been severely punished by Wall Street after falling on hard times, creating a bargain opportunity.

Or perhaps it's just plain boring, like a publicly traded utility stock or a small and specialized chemical manufacturer, and nobody is even paying attention.

Whatever the case, value investing is usually about finding hidden gems rather than chasing flashy companies everyone else is talking about. The appeal isn't popularity or future growth projections, but rather the current underlying value of that business right now.

What is an example of a value investment?

To illustrate what value investing is with a practical example, let's look at the iconic industrial stock GE Aerospace (GE), which changed its company name from General Electric following the recent spinoff of GE Vernova (GEV).

The firm has seen tepid growth in recent years. But look at GE stock, which nearly doubled in 2023 and is up about 75% in 2024. Clearly, investors see something in this company – and what they see is its underlying value.

Wall Street was overly negative on GE after a few bad years and wound up overselling the former Dow Jones stock. The company has been working on a multiyear turnaround plan, including the spinoff of both its healthcare and renewable energy businesses.

Things are looking up, even if GE is less dominant than it was in decades past. But GE didn't have to be a booming growth stock to make its investors money. It simply needed to be overlooked and undervalued.

How do I find the best value investments?

There are a host of big-name value investors on Wall Street who made names for themselves by looking for hidden gems like GE. Just a few of the more prominent ones include Berkshire Hathaway (BRK.B) chief Warren Buffett and economist Benjamin Graham, who many consider to be the father of value investing.

So what made these icons so successful, and how did they find the best stocks to buy for value investors?

There's never a sure-fire formula for any investing strategy, but a few of the metrics that value investors like Buffett and Graham closely monitor include:

Debt-to-asset ratio. Value investing prioritizes companies that have modest debts backed by much more substantial assets. Not only does a low debt load provide stability, it also tends to prove management is responsible and has restraint. Generally, a debt-to-asset ratio of 1 or less is very attractive as it means those debts are covered.

Price-to-earnings (P/E) ratio. Bigger companies obviously have bigger profits. So it helps to normalize the raw numbers by breaking down those profits into earnings per share and then comparing them against the company's current stock price. This allows for "apples-to-apples" comparisons between stocks. Right now, the average P/E ratio of the S&P 500 is about 27, though some industry groups have averages moderately higher or lower than that figure.

Dividend yield. Dividends are regular profit-sharing payments to shareholders. A company's dividend yield takes the total payments you get over 12 months and presents that money as a percentage of your initial buy-in. As you can imagine, getting a piece of your investment back regularly is a very attractive proposition to many folks.

There are many other financial metrics out there that matter to value investors, but this list is a good start if you're interested in using value investing strategies as part of a well-rounded portfolio.

While growth investment may get all the attention, value investments can still deliver under the right circumstances.

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Warren Buffett's Berkshire Hathaway (BRK.B, $302.82) took advantage of the market's second-quarter swoon to add to its stakes in Apple (AAPL, $173.16), Chevron (CVX, $156.80), Occidental Petroleum (OXY, $64.34) and a handful of other stocks, but the holding company didn't make any exciting or surprising new moves, a regulatory filing made late Monday revealed.

Chairman and CEO Buffett, along with co-portfolio managers Ted Weschler and Todd Combs, were once again net purchasers of equities during the three months ended June 30, although their pace of buying slowed considerably compared with Q1.

After subtracting sales, Berkshire spent $3.8 billion on stocks during the second quarter, down from net purchases of $41 billion in equities during the first three months of 2022. The S&P 500 lost more than 16% of its value during the second quarter. Suffice to say that Buffett and his lieutenants were once again greedy when others were fearful.

It's also worth noting that Buffett and his subalterns' buying stands in stark contrast to last year's second quarter, when Berkshire was a net seller of equities. And, for good measure, Buffett also spent $1 billion buying back Berkshire Hathaway stock during Q2.

Among the notable additions, Buffett bought another 3.9 million shares in Apple, which is Berkshire's largest position by a wide margin.

The company owned nearly 895 million shares in the iPhone maker, a stake worth $122.3 billion as of June 30. AAPL accounted for 41% of Berkshire's portfolio value at the end of Q2. That's down from 43% at the end of the first quarter due to a slump in Apple's share price.

Buffett has also been aggressively adding to Berkshire's stake in Occidental Petroleum. Berkshire bought an additional 9.6 million shares – worth about $530 million – in the integrated oil and gas firm in late June. The holding company again added to its stake in July, buying another 4.3 million OXY shares worth $250 million.

Including warrants, Berkshire owns roughly 30% of OXY's shares outstanding. Naturally, the conglomerate's large and growing position in OXY is fueling speculation that Buffett could be eyeing a buyout of Occidental Petroleum.

In some other notable purchases, Berkshire topped off existing stakes in Chevron, Celanese (CE, $116.22), Paramount Global (PARA, $26.55) and Ally Financial (ALLY, $35.68)

On the other side of Berkshire's ledger, the company exited what remained of its small stake in Verizon (VZ, $45.55), the only telecommunications stock in the Dow Jones Industrial Average. Berkshire also closed out its short-lived position in Royalty Pharma (RPRX, $43.87).

In other stock sales, Berkshire slashed its stake in Store Capital (STOR, $29.24) by more than 50%. Buffett also reduced Berkshire's exposure to General Motors (GM, $39.40) and Kroger (KR, $47.52).

Ultimately, however, Buffett and his lieutenants had themselves a relatively quiet quarter, making mostly immaterial moves. The Berkshire Hathaway portfolio is highly concentrated, after all, with its top five holdings accounting for 75% of the total portfolio value. STOR, GM and KR don't really move the needle here.

And so although Berkshire went on a shopping spree in Q2, it mostly consisted of bargain hunting in a few of Buffett's favorite names. Investors looking for new stock or sector ideas based on the Oracle's Q2 moves didn't get much, if anything, to work with.

When you buy shares of stock, you become a partner in a business. Perhaps I'm stating the obvious, but I doubt all investors see their purchases that way. Many see stocks as horses to bet on or as scorecards that tell them how their 401(k) is doing. Because stocks represent pieces of companies, the first consideration is whether that company is worthy of your partnership.

As I told readers two years ago, I keep a wish list of about a dozen companies. I want to become a partner, but I am waiting for the market to offer me a better price – an event that may never come. Some of these shares have been on my list for decades, and in my reluctance, I have missed spectacular successes.

Johnson & Johnson (JNJ) is a good example. I have lusted after the stock for 20 years, as it has gone from $54 to $176, with a dividend that has increased from 84 cents to $4.52 a share. If you bought J&J in mid-2002, your original investment would be yielding 8.4% annually in dividends alone. (Stocks I like are in bold. Prices and other data are as of June 3.)

When the market drops sharply, I don't despair. Instead, I pull out my list to see if any of the stocks I like have moved into buying range. In other words, could I become an owner? This is a subjective decision. I'm not looking for a particular price-earnings ratio but a general sense that now is the time to pounce on the value stocks.

Such an occasion presented itself in early 2020, when the market tanked on the realization that the COVID pandemic was serious. In the five-week period ending March 15, the S&P 500 stock index dropped 30%, and I told readers that it was time to "get great companies at a reasonable price."

I cited five stocks whose shares I had picked up after they'd been hammered. All have subsequently risen. Oneok (OKE), an energy pipeline company, was the big winner, going from $27 to $67. Hermès International Société (HESAY), the French luxury-goods retailer, went from $72 to $121, and Bank of America (BAC) from $20 to $36. Salesforce (CRM), the business software firm, and Starbucks (SBUX) notched smaller gains.

All but Oneok have suffered significant declines as the S&P 500 has posted double-digit losses since the end of 2021. Hermès, for instance, peaked in November at $188. I still own Hermès and the others. I am not a market timer. No one can pick the tops and bottoms with anything close to consistency. I can't possibly tell you whether the 2022 market decline will continue or worsen or reverse, and I am severely skeptical of anyone who tries.

More than a decade ago, I asked Mark Hulbert, whose Hulbert Financial Digest tracks the performance of market-timing newsletters, to examine the returns of the 97 newsletters that had been around for at least 10 years. He found that just seven of them had beaten the broad Wilshire 5000 Index over the decade.

As the late John Bogle, founder of Vanguard, put it, "After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know of anybody who knows anybody who has done it successfully and consistently."

By recommending that you keep a wish list and, when the time is ripe, act on it, all I'm saying is that at various points in their history good companies will become irresistibly inexpensive. Sure, they could fall some more, but take the opportunity to become an owner.

Below are five stocks that I’m moving from the wish list to the buy list.

Costco Wholesale (COST) stock dropped from over $600 to $416 in a month and a half this spring. It has bounced back but remains very attractive. Costco sells everything from groceries to garden supplies to tires in its 800 membership warehouses, about three-fourths of them in the U.S. Earnings keep rising impressively, year after year. High interest rates, supply-chain disruptions and the prospect of a recession are certainly concerns, but in the long run, don’t you want to be a partner with the best big-box retailer in the world?

Home Depot (HD), which operates 2,300 home-improvement stores, is a stock I have always wanted to own. Sales and earnings are expected to rise only a few percentage points in 2022 compared with last year, but the comparison is distorted because in 2021 sales exploded 29.9% with the issuance of COVID stimulus checks. Shares are down by one-fourth this year, and the P/E has dropped to just 18. The stock could go lower, but I am not going to pass up the chance to finally become an owner—especially with a dividend yield of 2.5%. (Home Depot is a member of the Kiplinger Dividend 15, the list of Kiplinger’s favorite dividend stocks.)

Illumina (ILMN) is the leader in the field of genomic sequencing, or determining the composition of DNA. For example, Illumina provides the tools to detect mutations in the COVID-19 virus and to determine where cancer has spread in the body and how to treat it. The stock has lost half its value in less than a year. Why? "Biotech investors are hard to impress," said an article in Barron's after sales rose 40% last year. Perhaps, but Illumina is on the cutting edge of health technology.

Netflix (NFLX) is the one that got away. I first bought the stock in 2003, when it was trading at less than $2 a share (adjusted for splits). After the stock quadrupled, I sold it and watched it soar. Disheartened, I never bought it back – even though it has gone through several periods of steep decline followed by strong advances. Netflix shares have dropped from about $700 in November to about $200 today, mainly on worries about competition cutting into subscriptions. What an overreaction! The stock, which carries a P/E of just 18.5 based on analysts' projected earnings for the 12 months ahead, is cheaper today than it was in 2018, even though sales have doubled and net income has quadrupled.

Public Storage (PSA) dominates the self-storage business. With a captive customer base that doesn't want to keep moving stuff around, the company faces little resistance in raising its monthly fees. Rental income at same-store facilities for the most recent quarter rose an incredible 15.7% compared with the same period last year. Public Storage is a real estate investment trust (REIT) that passes its tax liability on to shareholders, so it's best kept in a tax-deferred retirement account. Its most closely watched metric is funds from operations, the rough equivalent of earnings per share. For the three months ending March 31, FFO jumped 24.4% over the same period a year ago. As Public Storage sat on my wish list for three years, the stock doubled, but then this spring it fell more than 100 points in a few weeks.

I have other companies that are still on my wish list. You and I may differ on whether they have declined enough to be worth buying now, but at least keep a close eye on them. I have mentioned J&J already, but others are 3M (MMM), Alphabet (GOOGL), McDonald's (MCD) and Walt Disney (DIS). Better yet, make your own wish list. Carry it around on your mobile phone or on a scrap of paper in your pocket. The time will come to convert some of the names into partners.

James K. Glassman chairs Glassman Advisory, a public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. Of the stocks mentioned here he owns Hermès, Oneok, Starbucks, Bank of America and Salesforce. Reach him at James_Glassman@kiplinger.com.

Shares of small companies have been through a roller-coaster ride in 2021, but an opportunity might be presenting itself soon – especially in small-cap value stocks.

Small caps ripped higher early on this year as investors expected a rebound in the U.S. economy and were willing to take on risk during the early phase of an economic cycle. But the COVID-19 delta variant has investors worried that the recovery will stall. The result? The small-cap Russell 2000 is up 8% year-to-date – less than half the 17% gains of the S&P 500 in that same time frame.

But zooming in, small-cap value stocks have outperformed their growth counterparts this year. The iShares Russell 2000 Value ETF (IWN) is up 20% so far in 2021. By comparison, the iShares Russell 2000 Growth ETF (IWO) is roughly flat on a year-to-date basis.

Naturally, continued delta variant worries would weigh broadly on small caps, and particularly on value plays in cyclical sectors such as energy, industrials and financials. But Scott Wren, Senior Global Market Strategist at Wells Fargo Investment Institute, doesn't seem too worried about the longer-term performance of small caps.

"From our view, this cyclical and small-cap underperformance is a temporary stumble," he says. "Continue to lean into the recovery."

Translation: don't give up on small-cap stocks just yet. If nothing else, the recent pullback allows investors to initiate positions in what has historically been one of the best-performing asset classes at more attractive prices. And if you really want to "lean into the recovery," value plays remain the more direct choice.

With that in mind, here are 10 great small-cap value stocks to buy. These picks represent diverse industries, ranging from online gaming to infrastructure, auto parts to health and wellness. And each of these small-cap value stocks has benefited from a rebounding U.S. economy in 2021 – and could have more room to run.

Data is as of Aug. 18. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $646.6 million
• Industry: Specialty chemicals
• Dividend yield: N/A

Investors looking for a play on infrastructure spending should consider Koppers (KOP, $30.30), which makes treated wood products and chemical preservatives used in railroad bridges and crossings, utility poles, and residential home construction.

KOP is the largest supplier of crossties to Class I railroads in the U.S. and the second-largest supplier of utility poles. The company also holds top market shares in wood preservation chemicals, coatings and fire retardants. It has a global footprint, with 43 locations across North and South America, Europe, Asia and Australia.

Koppers continues to solidify its position as the market leader in wood treatment and protection chemicals via acquisitions and capacity expansion. Although this has swelled its debt, KOP has begun to address high leverage by divesting non-core assets and cutting expenses. The company plans to trim $30 million from debt this year and reduce its net leverage ratio to 3.1x. With no significant debt maturities before 2024, the firm has breathing room to pay down debt.

The company's adjusted earnings per share (EPS) rose 11% in the June quarter as a result of the impact of a strong home improvement market, partially offset by higher lumber prices. The company is guiding for adjusted EPS of $4.35 to $4.60 this year, up roughly 9% at the midpoint from earnings of $4.12 per share last year.

This is one of the cheaper small-cap value stocks, too, trading at a 7.1 times price multiple to forward earnings.

KOP is also well-liked by Wall Street pros. Of the five analysts covering the stock tracked by S&P Global Market Intelligence, three have it at Strong Buy, one says Buy and one deems it a Hold. Plus, the consensus price target of $43.40 represents expected upside of 43.2% over the next 12 months or so.

• Market value: $1.8 billion
• Industry: Residential construction
• Dividend yield: N/A

M/I Homes (MHO, $62.118) is one of the country's biggest producers of single-family homes, arriving in 13th place on Builder's list of top 100 homebuilders. The company serves 15 markets across 10 states and has a particularly strong footprint in some faster-growing areas, including Texas, Florida and the Carolinas. MHO's customer niche is first-time and move-up buyers seeking affordable home designs.

The company has experienced phenomenal success with its Smart Series-designed homes for first-time buyers. This concept was introduced five years ago in Tampa, Florida, and has expanded to 62 Smart Series home communities across 13 markets, with more planned during 2021. Smart Series homes accounted for 39% of MHO's June quarter sales.

Robust new home sales, spurred by continued low interest rates, have led to a surge in homebuilding. M/I Homes delivered 4,277 homes in the first six months of 2021, 39% growth in sales and 116% EPS gains. Explosive growth in contract backlog, which rose 49% to 5,488 homes in the six months ended June 30, bodes well for the company's future results.

M/I Homes controls and/or owns enough vacant land to support its building plans for the next five years. The housing stock also has great liquidity to fund growth, based on the $372 million in cash it had at the end of June, net homebuilding debt at just 16% of capitalization and no major debt maturities before 2025.

Despite a housing market boom and the company's record $2.5 billion in backlog sales, shares of this small-cap value stock are priced at only 4.2 times forward earnings.

• Market value: $761.1 million
• Industry: Education and training services
• Dividend yield: N/A

Perdoceo Education (PRDO, $10.86) provides onsite and online post-secondary education to non-traditional adult students through two accredited institutions – Colorado Technical University and American InterContinental University. The company offers a variety of degree options, including associate, bachelor's, master's and doctoral, with programs in business, nursing, computer science, information technology and criminal justice, among others.

This education services provider is benefiting from rising demand for post-secondary education, growing acceptance of online learning platforms, employer preference for hiring skilled professionals and increasing participation by non-traditional and adult students.

PRDO's recent investments in technology initiatives such as its Intellipath personalized learning technology are paying off by boosting student retention rates and enrollments. Total enrollments were at 43,100 students at the end of June, up 7.5% from the year prior. Adjusted EPS improved 5% in the first six months of 2021 and Perdoceo is guiding for 2021 adjusted EPS of $1.58 to $1.64 for fiscal 2021, which would represent a 3.2% improvement at the midpoint from 2020.

To accelerate its top-line growth, Perdoceo recently acquired DigitalCrafts, which specializes in training for web development, web design and cybersecurity. A liquid balance sheet showing minimal long-term debt and $480.7 million of cash and equivalents provides this company with plenty of expansion capital.

PRDO shares are modestly valued at a 6.7 times price multiple to forward EPS and a 6.3 times price multiple to cash flow.

As far as analysts go, the three covering PRDO that are tracked by S&P Global Market Intelligence rate it a Buy or Strong Buy, with an average target price of $22 – more than double its current price. In other words, the pros think this is one of the best small-cap value stocks out there.

• Market value: $1.3 billion
• Industry: Engineering and construction
• Dividend yield: 1.0%

Another potential play on infrastructure spending is Primoris Services (PRIM, $24.87). This company provides engineering and construction services across the U.S. and Canada to major public utilities, petrochemical and energy companies and municipal governments. PRIM operates across three business segments – utilities (48% of revenues), energy/renewables (38% of revenues) and pipeline (14% of revenues).

Recent investments in its utilities and energy/renewables businesses, including the acquisition of telecom services platform Future Infrastructure, paid dividends for the company during the June quarter, with both of these business segments achieving 20%+ year-over-year sales growth. Although revenues from the pipeline segment declined due to the closeout of projects in 2020, gross margins improved. The company is guiding for 2021 EPS ranging from $2.30 to $2.50, which is up 11% at the midpoint from last year.

Looking ahead, Primoris should benefit from its transition to higher growth and margin markets like renewables, where the company is experiencing secular tailwinds and rising backlog. Primoris estimates a $225 billion market opportunity in renewables, which currently represents $350 million of the company's $2.9 billion backlog.

Primoris has been a reliable grower, delivering 13% annual revenue growth and 15.5% yearly adjusted EPS growth over three years. The company also pays a 6-cent per share quarterly dividend, currently yielding 1.0%.

PRIM stock trades at a modest 10.5 times price multiple to forward earnings.

As far as small-cap value stocks go, analysts are bullish toward this one. UBS analyst Steve Fisher initiated coverage on PRIM with a Buy rating in July. He likes the company's new business mix deemphasizing oil and gas. Morgan Stanley analyst Matthew Sharpe also recently commenced coverage, rating shares Overweight (the equivalent of a Buy), highlighting PRIM's durable portfolio and tailwinds driving future revenue growth .

• Market value: $939.3 million
• Industry: Auto parts
• Dividend yield: 2.4%

Standard Motor Products (SMP, $43.85) is a leading manufacturer, distributor and marketer of replacement parts for cars and heavy-duty trucks. Its products are sold across North and South America, Europe and Asia under well-known brands that include Standard, BWD, TechSmart, Intermotor, Hayden, ACI and Four Seasons.

The company operates in two business segments – engine management, which specializes in ignition and emission parts, and temperature control, which focuses on parts for air conditioning and heating systems, engine cooling, power windows and washer systems.

New business wins and two recent acquisitions fueled 38% year-over-year sales growth and 142% adjusted EPS gains for Standard Motor Products during the June quarter. The bottom line came in at $1.26 per share, well above the 60 cents per share analysts were expecting. While some of this strong growth reflects easy comparisons to last year's COVID-impacted June quarter, these results also compare well to 2019 pre-COVID financial performance.

SMP expanded its footprint in the OEM (original equipment manufacturer) market for heavy duty and commercial vehicle parts by acquiring two businesses – power management devices maker Trombetta and Stoneridge's (SRI) soot sensor division. The purchases together add $75 million to annualized sales and critical mass to become a major supplier in this OEM space. In addition, these transactions help prepare Standard Motor Products for the market's gradual shift to electric vehicles (EVs).

As far as analyst ratings go, two of the pros covering SMP that are tracked by S&P Global Market Intelligence rate the stock a Strong Buy, while the other one calls it a Buy. Plus, shares are trading at a deep discount to their $54.67 consensus price target.

When it comes to small-cap value stocks, this one is worth keeping on your radar.

• Market value: $1.3 billion
• Industry: Drug manufacturer
• Dividend yield: N/A

Supernus Pharmaceuticals (SUPN, $24.02), formerly known as Shire Laboratories, develops and commercializes products for the treatment of central nervous system (CNS) disorders. The healthcare company's portfolio includes approved treatments for epilepsy, migraine and attention-deficit hyperactivity disorder (ADHD). Supernus is also developing product candidates for Parkinson's disease, epilepsy, depression and rare CNS diseases.

Supernus secured Food and Drug Administration (FDA) approval for Qelbree, its novel nonstimulant treatment for ADHD, in April. ADHD is one of the most common neurodevelopmental disorders diagnosed in childhood and it often lasts into adulthood.

The Centers for Disease Control and Prevention (CDC) estimates that approximately 6.1 million children (9.4%) in the U.S. have been diagnosed with ADHD, and the prevalence of ADHD in adults domestically could range between 4% and 5%. Unlike other drugs in this space, Qelbree is neither a stimulant nor a controlled substance.

SUPN has an FDA application pending for SPN-830, a subcutaneous injection pump to treat patients with Parkinson's disease, a neurodegenerative disorder that affects roughly 1 million Americans. The mainstay treatment for Parkinson's is levodopa, but the effect of this drug is short-lived. SPN-830 provides continuous treatment for the ill-effects of the disease.

June quarter revenues for Supernus rose 12% from the year prior, mainly due to a full quarter of sales for Apokyn, a treatment acquired last year for advanced Parkinson's disease and a small contribution from Qelbree. EPS was 34% lower at 43 cents as a result of expenses related to Qelbree's May launch and the commercialization of Apokyn and other acquired products.

Supernus is guiding for 2021 sales to arrive at $550 million to $580 million – up 8.7% at the midpoint from 2020 revenues – and operating earnings between $70 million and $90 million, down from 2020 due to product launch costs.

Analysts are upbeat toward this small-cap value stock. According to S&P Global Market Intelligence, two pros deem SUPN worthy of a Strong Buy rating, one says Buy and one calls it a Hold. The average price target of $35.00 represents expected upside of 45.7% over the next 12 months or so. And Jeffries analyst David Steinberg (Buy) believes SUPN could gain 20% market share in ADHD with Qelbree, and forecasts peak sales for the product above $600 million.

• Market value: $695.1 million
• Industry: Engineering and construction
• Dividend yield: N/A

Another solid infrastructure play is Tutor Perini (TPC, $13.61), which provides general contracting, design and construction services to public and private clients worldwide. Engineering News-Record ranks this company as the nation's largest contractor in the transportation market and one of the top domestic contractors overall.

TPC's largest business segment – civil – accounts for 42% of revenues. The civil segment specializes in bridges and tunnels, highways, mass transit and wastewater treatment, and could benefit significantly from the Biden administration's proposed infrastructure spending bill. Tutor Perini's two remaining businesses, building and special contracting, represent 35% and 23% of revenues, respectively.

Most of the company's civil engineering projects are large scale and complex, ranging in value from $100 million to $1.0 billion. In bidding for new contracts, Tutor Perini counts its proven technical experience, abilities to bond in support of very large projects and sizable equipment fleet as major competitive advantages.

The company ended the June quarter with $7.5 billion of backlog, including $5.8 billion of projects for state and local governments. This huge backlog should provide high revenue visibility over the next several years.

While June quarter revenues were down slightly from last year at $1.2 billion, EPS improved 65% due to a continued shift towards higher margin projects in the civil segment.

The shares are attractively priced as far as small-cap value stocks go, trading at just 6.5 times forward earnings.

Looking at analyst ratings on S&P Global Market Intelligence, two pros rate TPC stock a Strong Buy, while one calls it a Hold.

• Market value: $1.1 billion
• Industry: Packaging and containers
• Dividend yield: N/A

Food containers made by Tupperware Brands (TUP, $22.10) are a staple in most U.S. homes, and the company also distributes its products in over 80 countries through its extensive network of independent sales reps. However, Tupperware has struggled in recent years due to declining revenues, an eroding network of sales associates and a debt-laden balance sheet.

Under new management, the consumer discretionary name began implementing a turnaround plan last year designed to trim costs, build new digital distribution channels, launch new products in the beauty and personal care space and better motivate its sales agents.

These strategies began delivering results almost immediately, helping Tupperware increase gross savings by $193 million last year and fueling 2021 sales growth. During this year's June quarter, Tupperware recorded its fourth consecutive quarter of double-digit sales growth. June quarter sales rose 17% from the year prior and adjusted EPS grew 13% to 95 cents.

TUP has used its rising free cash flow and proceeds from the sale of non-core assets to reduce debt and ended the June quarter with its ratio of debt-to-adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) at 2.05, down from 4.91 in Q2 2020. Tupperware's board of directors also just approved a $250 million share repurchase plan.

Citigroup analyst Wendy Nicholson recently upgraded TUP to Buy from Hold, citing the company's attractive valuation and her growing optimism that the turnaround plan is gaining traction.

Among small-cap value stocks, Wall Street pros are projecting major growth for this one. While Tupperware doesn't provide guidance, consensus analyst estimates look for EPS to be up 33% this year and 12% next year.

TUP shares have an attractive valuation, too, trading at 6.9 times forward earnings.

• Market value: $465.6 million
• Industry: Consumer electronics
• Dividend yield: N/A

Turtle Beach (HEAR, $25.70) is a top player in the $8.5 billion gaming accessory market. The company sells console gaming headsets, keyboards, mice and other gaming accessories. The global gaming market is experiencing explosive growth, expected to swell from $176 billion this year to more than $200 billion by 2024.

Turtle Beach boasts the number one gaming headset for Nintendo (NTDOY), Microsoft's (MSFT) Xbox and Sony's (SONY) Playstation systems and holds revenue share bigger than the next four largest competitors combined. The company's Roccat product line is expanding on a global basis, and sales tripled in the first half of this year. Another growth catalyst comes from the company's January acquisition of Neat Microphones, which is launching a new product line in 2021.

For this year, Turtle Beach is targeting revenue growth of 7%. The company recently increased guidance for 2021 adjusted EPS by 3.3% to $1.55.

Given its robust growth, this is one small-cap value stock that's in high demand. Activist investor Donerail Group, which owns a 3.1% stake in HEAR, reportedly offered to buy out the company earlier this year, said people familiar with the matter. Subsequent reports indicated Turtle Beach declined the offer.

All five of the analysts covering HEAR that are tracked by S&P Global Market Intelligence rate the stock a Buy or Strong Buy. Plus, the average target price of $39.83 suggests implied upside of 55% over the next 12 months or so.

• Market value: $1.9 billion
• Industry: Household and personal products
• Dividend yield: N/A

USANA Health Sciences (USNA, $94.42) develops, manufactures and markets nutritional and personal care products that promote long-term health. Sales are made direct through a worldwide network of independent agents. The company markets more than 60 products, has sales in 24 countries and serves approximately 652,000 active customers.

Over 49% of the company's sales are made in China. The rest of Asia contributes 34% of revenues, and Europe and the Americas together represent the remaining 17%. USNA plans to grow by investing in digital marketing, launching additional products and expanding internationally and via acquisitions.

The early 2021 launch of the company's new Active Nutrition product line, which includes new products for weight management, digestive help, energy and hydration, helped USNA achieve 30% year-over-year sales gains, 9% active customer growth and 42% EPS improvement during the June quarter.

The company warned of tougher COVID-19-related comparisons in the second half of 2021. However, it's still guiding for 2021 sales growth of 11.5% at the midpoint of its $1.24 billion to $1.28 billion guidance, while EPS is expected to arrive between $6.15 and $6.50 – up 8% at the midpoint.

When it comes to valuation, this is another one of the small-cap value stocks that is reasonably priced. USNA shares are trading at a modest 14.3 times forward earnings.