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Investing continued from page 44

on Warren Buffett , sees information technology growing earnings per share more than 20 % this year and communication services seeing that growth at 30 %. Both are easily outpacing the 9.5 % he projects for the S & P 500 .

“ So , the two sectors that are the strongest in the market are growing two to three times faster than the market ,” Hagstrom tells Financial Advisor . “ And that ’ s because of AI .”

In pivoting to value , Morningstar ’ s Sekera says investors will find solid investment opportunities among what he calls the “ three U ’ s ”: the underperformed , the unloved and the undervalued .

“ Right now , I would say real estate is probably the most hated sector on the Street ,” he says .

Given that Morningstar expects the fed funds rate to fall to a range of 4 % to 4.25 % by the end of 2024 , Sekera finds dividend-paying stocks appealing , and they ’ re often found in the value category .

Not surprisingly , he ’ s steering clear of the downbeat urban office market and favoring real estate classes with much more defensive characteristics . One such sector is healthcare , which trades at just a 1 % premium to his fair value . “ Hospitals , medical offices and research facilities are all doing just fine ,” he says .

He also likes utilities , which have lost 5 % since 2021 , significantly underperforming the broader market amid rising interest rates . “ The market has overcorrected to the downside ,” Sekera wrote in a market note . “ Fundamentally we think the outlook for the utility sector is as strong as it has ever been .” The sector is benefiting from the shift to renewable energy and investment in the electric grid .

He also perceives “ a significant number of undervalued opportunities ” in energy , which he sees as a natural hedge against more geopolitical risk or sustained high inflation , according to his note .

The S & P 500 has indeed been volatile . The index fell below 5,100 in mid- April , hit by sticky inflation , geopolitical concerns and weakness in the mega-cap companies Apple and Tesla .

The S & P ’ s ride to bulls ’ targeted projections indeed won ’ t be smooth , but advisors playing in both growth and value will be winners even when they roll out the tarp and call the growth game over . But don ’ t underestimate growth or its ability to run into extra innings .

“ The thing to remember ,” says Hagstrom , “ is that bull markets keep going as long as earnings keep growing . And it appears U . S . GDP is on solid ground .”

MAY 2024 | FINANCIAL ADVISOR MAGAZINE | 59