Citi screens for mid-cap tech stocks for barbell investment approach with Magnificent 7

Citi Research said investors should continue to own the Magnificent 7 group of mega-cap tech stocks in the S&P 500 (SP500) but for a broader technology set-up suggested a barbell approach with mid-cap traditional and non-traditional tech exposure.

The weight of the Magnificent 7 stocks –- Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA) –- in the S&P 500 (SP500) makes those stocks still critical to the index’s performance, but their significant outperformance may be more in the measured going forward, Citi Research said in a note.

For the other 493 stocks in the benchmark (SP500), earnings expectations for 2024 are stabilizing although 2025 has not, Scott Chronert, head of Citi’s U.S. equity strategy, said. “Still, the setup is for solid Magnificent 7 growth in 2025 with a high-single digit rate for the other 493,” he said

Citi said along with investing in Mag 7, it advocates ongoing exposure with new money focused on a barbell with down cap tech names. Citi has market weight calls on the Information Technology and Communication Services sectors.

The firm screened for buy-rated, mid-cap stocks with at least 15% expected total return and positive 2024 EPS per consensus estimates. Here’s Citi’s list:

• Elastic (NYSE:ESTC) – Expected Total Return: 79.3%
• DocuSign (NASDAQ:DOCU) – Expected Total Return: 52.8%
• Western Digital (NASDAQ:WDC) – Expected Total Return: 51.8%
• WEX (NYSE:WEX) – Expected Total Return: 49.2%
• Zscaler (NASDAQ:ZS) – Expected Total Return: 47.9%
• Pintrest (NYSE:PINS) – Expected Total Return: 42.8%
• Pure Storage (NYSE:PSTG) – Expected Total Return: 42.7%
• Playtika Holding (NASDAQ:PLTK) – Expected Total Return: 40.5%
• Unity Software (NYSE:U) – Expected Total Return: 40.4%
• MongoDB (NASDAQ:MDB) – Expected Total Return: 38%
• Datadog (NASDAQ:DDOG) – Expected Total Return: 36.3%
• MKS Instruments (NASDAQ:MKSI) – Expected Total Return: 35.1%
• Global Payments (NYSE:GPN) – Expected Total Return: 34%
• Veeva Systems (NYSE:VEEV) – Expected Total Return: 30.5%
• Teradyne (NASDAQ:TER) – Expected Total Return: 28.9%
• Smartsheet (NYSE:SMAR) – Expected Total Return: 27.7%
• Take-Two Interactive Software (NASDAQ:TTWO) – Expected Total Return: 27.3%
• Vontier (NYSE:VNT) – Expected Total Return: 27.2%
• Teradata (NYSE:TDC) – Expected Total Return: 26.5%
• Pegasystems (NASDAQ:PEGA) – Expected Total Return: 25.2%
• Bill Holdings (NYSE:BILL) – Expected Total Return: 25%
• HubSpot (NYSE:HUBS) – Expected Total Return: 24.8%
• AppLovin (NASDAQ:APP) – Expected Total Return: 24.7%
• CCC Intelligent Solutions Holdings (NASDAQ:CCCS) – Expected Total Return: 23.7%
• Corning (NYSE:GLW) – Expected Total Return: 23.6%
• Liberty Global (NASDAQ:LBTYA) – Expected Total Return: 23.2%
• Microchip Technology (NASDAQ:MCHP) – Expected Total Return: 22.2%
• Interpublic Group of Cos. (NYSE:IPG) – Expected Total Return: 21.9%
• Globant (NYSE:GLOB) – Expected Total Return: 20.4%
• Best Buy (NYSE:BBY) – Expected Total Return: 19.5%
• Science Applications International (NASDAQ:SAIC) – Expected Total Return: 19.4%
• Digital Realty Trust (NYSE:DLR) – Expected Total Return: 19.3%
• Amdocs (NASDAQ:DOX) – Expected Total Return: 19.1%
• Coherent (NYSE:COHR) – Expected Total Return: 18.5%
• CDW (NASDAQ:CDW) – Expected Total Return: 17.5%
• SBA Communications (NASDAQ:SBAC) – Expected Total Return: 17.5%
• VeriSign (NASDAQ:VRSN) – Expected Total Return: 17.2%
• Corpay (NYSE:CPAY) – Expected Total Return: 16.5%
• Dynatrace (NYSE:DT) – Expected Total Return: 15.7%
• GoDaddy (NYSE:GDDY) – Expected Total Return: 15%

The S&P 500 (SP500) has risen 14.7% YTD. Exchange-traded funds to monitor the index include (SPY), (IVV) (VOO), (IVV), (SSO) and (SH).

Tags: META