Dec 8 (Reuters) - Yardeni Research is no longer "overweight" on the "Magnificent 7", ending a 15-year bullish stance on U.S. tech stocks on worries over elevated concentration and opportunities in the broader market.
The research firm, founded by Wall Street veteran Ed Yardeni, now recommends "underweighting" the seven stocks and "overweighting" the remaining 493 in the S&P 500 index, according to a note dated December 7.
Yardeni expects more rivals to target the rich profit margins enjoyed by the "Magnificent 7" and productivity and profitability of the rest of the S&P 500 stocks to climb.
"In effect, our spin is that every company is evolving into a technology company," Yardeni said.
The Magnificent 7 refers to a group of the biggest U.S. stocks, including tech giants Nvidia NVDA.O, Microsoft MSFT.O and Apple AAPL.O. The group has powered much of the gains in the market over the past few years.
While constructing an S&P 500 .SPX portfolio, Yardeni recommends staying "market weight" on the information technology .SPLRCT and communication services .SPLRCL sectors and turning "overweight" on financials .SPSY, industrials .SPLRCI and healthcare .SPXHC.
The long-established bullish stance on the two downgraded sectors was justified as their forward earnings continued to soar, the firm said, but risks have risen as their concentration has jumped sharply.
As of Friday's close, the information technology and communication services together accounted for about 50% of the S&P 500 weightage, according to data compiled by LSEG. The weighting is the highest since 2000, according to LSEG data.
Ed Yardeni, who coined the phrase "bond vigilantes" more than 40 years ago, serves as president and chief investment strategist of the sell-side consulting firm.
(Reporting by Shashwat Chauhan in Bengaluru; Editing by Sriraj Kalluvila)
((Shashwat.Chauhan@thomsonreuters.com;))
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