MW These 6 great stocks are bargain-priced right now - and a much better bet than Big Tech
By Michael Brush
Here's what value-stock pro Bill Nygren is holding in the ETF he manages
"A cheap enough price can make an average business a good investment," says Bill Nygren.
'Our tech weighting is awfully close to zero.'Fund manager Bill Nygren
For decades we've had it drilled into us that the safest way to invest is to buy the S&P 500 SPX and let it ride. But that's one of the worst stock-market strategies right now.
"Today when you do that you are buying a concentrated technology fund with tech holdings significantly higher than we think is prudent," says Bill Nygren, the longtime manager of the Oakmark Fund OAKMX.
That's because the "Magnificent Seven" and a handful of other megacap tech stocks dominate the index. "This has made the S&P 500 look more different from the average company than it has in a long time," Nygren says.
This imbalance presents a great opportunity for investors, for two reasons.
1. It creates an unusually large price-earnings spread between tech and the rest. "The opportunity is in the stocks that have been left behind, trading at barely double-digit P/E multiples," says Nygren, who also runs the Oakmark U.S. Large Cap ETF OAKM.
2. The pickings are good. "The portfolio you can build today of companies at a large discount to the S&P 500 is more diversified and higher quality than it has typically been," Nygren said in a recent interview.
Nygren is a value-stock investor, but that does not mean he scrapes the bottom of the barrel for the cheapest stocks. Instead, Nygren makes these three twists on value investing:
1. Buy great businesses at average prices
Nygren singles out two examples from his ETF's top 10 holdings.
Charles Schwab $(SCHW)$: Schwab's low-cost offerings are popular among investors, so the company is growing faster than most wealth-management businesses.
Earnings are expected to advance 20% a year for the next couple of years for another reason: Schwab typically invests its cash in five-year paper. Bonds it bought several years ago when yields were lower are now rolling over. Schwab will be reinvesting the proceeds for higher returns. "As the portfolio refreshes, that capital will start earning the current interest rate, and that is supplementing their growth," Nygren says.
The bottom line, Nygren says, is that Schwab will post above-average growth but its stock prices it like a typical business.
Airbnb $(ABNB)$: Shares of the short-term rental company Airbnb trade at a premium to the S&P 500, but Nygren says this above-market valuation doesn't fully capture the company's earnings potential.
Airbnb is rolling out a new business line that offers renters deals on events and excursions during their stays. Tourists in Napa Valley, for example, might want to take up Airbnb offers for guided wine-tasting tours or a scenic hot-air-balloon tour above the vineyards. "What is being missed is the company is spending a lot to build out its experiences platform," says Nygren. The upshot: "It is likely, over next five years, earnings will more than double."
2. Buy ordinary companies at great prices
'A cheap enough price can make an average business a good investment.'
Many investors believe you have to find extraordinary companies to buy and hold forever because their stocks will just keep going up. "Our experience is you can do better if you buy ordinary businesses that are very cheap," Nygren says. "A cheap enough price can make an average business a good investment."
Here are two examples. "We are not saying these are the best businesses out there," Nygren says. "We are saying we think they are priced such that it won't take great results to justify an increase in the P/E multiple."
Zimmer Biomet Holdings $(ZBH)$: There are two main companies in orthopedics, implants and surgical instruments: Zimmer Biomet and Stryker $(SYK)$. Stryker is the favorite among investors, as you can see from their price-earnings ratios. Recently, Zimmer traded at a trailing P/E of 21.3 compared to 43.8 for Stryker, according to LSEG.
Zimmer's big discount to Stryker is why Nygren favors it. "Nobody is going to argue Zimmer is better business. Zimmer isn't growing as fast as Stryker," says Nygren. "But we think that spread in P/E multiples overcompensates for the quality difference between the two companies."
Citigroup (C): Citigroup has at least three positives going for it, according to Nygren, which suggest its valuation is too low. Citigroup has a quality treasury services division that helps companies manage cash and do business around the globe. Next, CEO Jane Fraser has taken steps to hold managers more accountable for their divisions and create greater cooperation among them via tactics like cross-selling. Third, the bank is buying back its stock, which is boosting earnings per share.
Citigroup trades at slightly more than its book value, compared to 2.4 times book for JPMorgan Chase $(JPM)$. Nygren says investors aren't giving Citigroup enough recognition for the expected growth from these three drivers. This is the second-largest position in the Oakmark U.S. Large Cap ETF.
3. Buy stocks mispriced by accounting distortions
Accounting rules that distort financial reports can create hidden value at companies. That's the case with two other businesses Nygren favors:
Salesforce (CRM): This customer-service management software company recently traded at about 17 times forward earnings, a 53% discount to the S&P 500 forward P/E of 23.4, according to LSEG.
But a big part of that discount might be because of a mirage created by accounting rules which reduces Salesforce's near-term earnings unjustifiably, Nygren says. This situation arises because Salesforce is making big investments in customer acquisition.
Normally, accounting rules allow companies to spread investment expenses out over a decade or so. This reduces the expense hit to near-term earnings in the next year or two, boosting reported earnings. But with customer acquisition costs, accounting rules say companies have to book all the expenses right away, even though the benefits may play out over a decade. That's happening at Salesforce, and it's reducing near-term earnings which drags down the forward P/E. The company is worth more than the forward P/E suggests, Nygren says.
Targa Resources( TRGP) : This pipeline company serves oil- and natural-gas producers in the Permian, America's blue-chip energy basin. Like Salesforce, Targa's reported earnings are artificially suppressed because of accounting rules.
Accounting guidelines say Targa has to depreciate investments in pipelines over two decades, even though the infrastructure lasts for four or five decades. In short, this suggests the company is worth more than it appears, and that makes its stock attractive to Nygren. The difference is because the economic life of pipelines is longer than depreciable life.
What Nygren avoids now
Nygren maintains a diversified portfolio, but there are several areas of the market where he won't go right now. Nygren has trimmed exposure to financials, including BlackRock $(BLK)$ and Bank of New York Mellon $(BK)$, given their strength last year.
His fund also owns very little tech outside of Alphabet $(GOOG)$ $(GOOGL)$ and Amazon.com (AMZN). "Our tech weighting is awfully close to zero," he says. "This gives us a portfolio that looks more different from the S&P 500 than it ever has."
Michael Brush is a columnist for MarketWatch. At the time of publication, he owned SCHW and CRM. Brush has suggested SCHW, C, ZBH, CRM, BLK, BK, GOOG and AMZN in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks
More: These hot S&P 500 stocks show where investors are heading as they run away from tech
Also read: This AI stock is the newest member of the S&P 500
-Michael Brush
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February 05, 2026 07:50 ET (12:50 GMT)
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