Investors should consider shifting away from large-cap tech stocks (XLK), (MAGS) toward mid-cap (SP400), (NYSEARCA:SPMD) companies for better value in today’s market, according to Vahan Janjigian, chief investment officer at Greenwich Wealth Management.
In an interview with CNBC, Janjigian pointed out that the S&P 500 (SP500) can no longer be considered a broad-based market index as the top 10 stocks (NVDA), (MSFT), (AAPL), (AMZN), (META), (AVGO), (GOOGL), (GOOG), (TSLA), (BRK.B) account for 40% of the weight, while the top half of stocks make up 90% of the index.
“For the past hundred years, until about February 2008, value (IVE) has outperformed growth (IVW) and small cap (IWM), (SP600) has outperformed large cap (SP500),” he said.
He noted that the 2008 financial crisis and subsequent Federal Reserve intervention created unprecedented market conditions where traditional investment approaches stopped working as expected.
The current market shows signs of euphoria, and the U.S. market’s cyclically adjusted price-to-earnings ratio higher than it has been 98% of the time. Janjigian attributes much of this excitement to younger investors following momentum strategies, saying “a lot of investors [are] looking at what’s working and just piling in and driving that higher.”
When asked about tariff impacts, Janjigian suggested that while mid-cap companies typically generate more of their revenue domestically, they aren’t necessarily less exposed to tariffs since they still rely on foreign manufacturers. “I think investors have reached that conclusion, and they believe that the larger companies can handle it better and perhaps absorb more of the cost,” he said.
Despite advocating for mid-cap diversification, Janjigian highlighted Verizon (NYSE:VZ) as a large-cap value stock he particularly likes. “This is a stock that pays a very generous dividend. It’s been increasing the dividend every single year for the past 18 years and – believe it or not – it’s actually outperforming the S&P 500 (SP500) so far this year,” he said, contrasting Verizon’s reasonable 9x earnings valuation with growth stocks like Palantir (PLTR) trading at approximately 285x earnings.
“I do believe it makes sense to pay more for growth, but the big question is how much more should you pay for growth?” he concluded, suggesting that patient investors might find better value in stocks like Verizon (NYSE:VZ) rather than chasing momentum in the current market environment.