In this article we will take a look at the 10 best non-tech stocks to buy now. You can skip our detailed analysis of these stocks’ outlook for 2021 and some of the major growth catalysts, and go directly to 5 Best Non-Tech Stocks To Buy Now.
Analysts and famous hedge fund managers are becoming unequivocal in their warnings that tech stocks are overpriced and inflating the already soaring valuations of the broader market, affirming the fears that we might be in a bubble. Billionaire David Einhorn of Greenglight Capital recently said in his letter to investors that tech stocks without strong fundamentals are in an “enormous bubble.” The billionaire believes the mania we saw in the tech IPO landscape in the midst of the pandemic, huge market caps, soaring valuations and rising speculative instruments all confirm his theory that we are in a bubble.
10 Best Non-Tech Stocks To Buy Now
The warning signs indicating the possibility that we could be in a bubble right now are plenty. Citigroup’s famous “panic/euphoria” index – metrics of the index include NYSE short interest ratio, margin debt, Nasdaq daily volume, composite average of Investors Intelligence and the American Association of Individual Investors bullishness data, the put/call ratio, the CRB futures index, gas prices, the ratio of price premiums in puts versus calls – currently reads its highest value on record.
Tech stocks are, however, starting to face signs of a correction. The NASDAQ slipped 3% on March 18, its biggest decline since February 25, as the yield on the benchmark 10-year Treasuries surpassed 1.75% and touched its 14-month high. Tech stocks belong to the category of growth stocks, whose value recede when yields rise as tech stocks imply earnings far from the future.
One of the most shocking examples of the current market euphoria is Hertz Global shares rising after the company filed for bankruptcy in 2020.
The Economist Intelligence Unit’s Cailin Birch said in a report that investors have started to expect that the Fed and the Congress will “keep coming to the rescue with ever more stimulus.” However, the analyst believes, these programs only help the Wall Street and have “no positive spillover for Main Street.”
“The risk of an asset bubble bursting has risen significantly,” Birch noted.
Amid the market noise, it’s become difficult to spot truly valuable and potentially profitable stocks. That’s why in this article we will focus on the non-tech sectors of the market and talk about 10 best non-tech stocks to buy now. These stocks have a PE ratio of less than 15, with revenue growing more than 10% over the last 12 months.
The rising volatility is causing the turbulence in the financial markets, hence the warnings of a bubble. Even the hedge funds are struggling to maintain their profits. The hedge fund industry’s reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context and industry outlook in mind, let’s start our list of 10 best non-tech stocks to buy now.
10. FS Bancorp, Inc. (NASDAQ: FSBW)
Number of Hedge Fund Holders: 4
PE Ratio: 7.94
FS Bancorp is one of the best non-tech stocks to buy now. The company operates 1st Security Bank of Washington. The company has 21 full-service branches and seven home loan production offices. The stock is up 140% over the last 12 months. The company in January increased its quarterly dividend by 24% to $0.26 per share.
As of the end of the fourth quarter, 4 hedge funds in Insider Monkey’s database of 887 funds held stakes in FSBW, compared to 5 funds in the third quarter. EJF Capital is the biggest stakeholder in the company, with 162,500 shares, worth $8.9 million.
9. Enstar Group Limited (NASDAQ: ESGR)
Number of Hedge Fund Holders: 11
PE Ratio: 3.34
Enstar ranks 9th in our list of 10 best non-tech stocks to buy now. The insurance group offers capital release solutions and specialty underwriting services. It segments include Non-Life Run-Off, Atrium and StarStone. The stock is up 115% over the last 12 months. Enstar is on the portfolio of Chinese billionaire Zhang Lei.
A total of 11 hedge funds tracked by Insider Monkey were bullish ESGR at the end of the fourth quarter, down from 13 funds a quarter earlier.
8. Hibbett Sports, Inc. (NASDAQ: HIBB)
Number of Hedge Fund Holders: 20
PE Ratio: 16.50
Alabama-based Hibbett Sports sells athletic footwear and sports apparel. The stock has gained 627% over the past 12 months. The company’s strength lies in its huge ecommerce presence. In the fourth quarter, the company’s comp sales jumped 21.9%, while ecommerce comparable sales increased by 44.8%. Digital sales account for 17.1% of the company’s total sales.
According to our database, the number of HIBB’s long hedge funds positions decreased at the end of the fourth quarter of 2020. There were 20 hedge funds that hold a position in Hibbett Sports compared to 21 funds in the third quarter. The biggest stakeholder of the company is Jim Simons’ Renaissance Technologies, with 529,192 shares, worth $24.4 million.
7. KB Home (NYSE: KBH)
Number of Hedge Fund Holders: 28
PE Ratio: 14.12
KB Home ranks 7th on the list of 10 best non-tech stocks to buy now. KBH is a home-building company that primarily serves the market of first-time home buyers. KB Home is listed in Fortune’s fastest-growing companies list. KB Home shares have gained 260% over the last 12 months. In February, Goldman Sachs analyst Susan Maklari upped KB Home to Buy from Sell, citing a strong backlog. Maklari upped KB Home price target to $51 from $32.
Fisher Asset Management is one of the 28 hedge funds tracked by Insider Monkey having stakes in KBH at the end of the fourth quarter. The fund owns over 2.8 million shares of the company.
6. The Michaels Companies, Inc. (NASDAQ:MIK)
Number of Hedge Fund Holders: 33
PE Ratio: 11.05
Ranking 6th on the list of best non-tech stocks to buy for 2021 and beyond is arts and décor firm The Michaels Companies, Inc. The company has over 1200 stores across North America. The stock has gained 1300% over the last 12 months. Earlier in March, the company said it has agreed to be acquired by Apollo Global Management, Inc. in a transaction that values Michaels at roughly $3.3 billion.
As of the end of the fourth quarter, there were 33 hedge funds in Insider Monkey’s database that held stakes in MIK, compared to 38 funds in the third quarter. Contrarius Investment Management, with 8.98 million shares of MIK, is the biggest stakeholder in the company.
In on of their investor letters, Bernzott Capital Advisors highlighted a few stocks and Michaels Companies Inc. (NASDAQ:MIK) is one of them. Here is what Bernzott Capital Advisors said:
“Michaels (MIK): After initiating a position in July 2017, we completed a re-underwriting of the company in December 2019 and concluded we made a mistake. MIK faces several structural challenges we did not forsee: lower margins due to increased competition and tariffs; management turnover, including the CEO, EVP Supply Chain and IT, and SVP Marketing; higher debt costs; and a major business model pivot switching customer focus from skilled enthusiasts to novices. The position was sold.”
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Disclosure: None. 10 Best Non-Tech Stocks To Buy Now is originally published on Insider Monkey.
