Longtime value investor Bill Nygren finds cheap stocks outside the Mag 7

Oakmark Funds' Bill Nygren advises institutional investors to seek value opportunities outside the S&P 500's megacap tech dominance, favoring strong companies with single-digit price-to-earnings multiples. He specifically highlighted Corebridge Financial (CRBG) for its robust buyback program and 5x P/E, Delta Air Lines (DAL) due to its strong management, balance sheet, and travel demand despite underperformance, and Merck (MRK) for its diversified assets in vaccines, animal health, and promising oncology pipeline.

Analysis

Veteran portfolio manager Bill Nygren of Oakmark Funds articulates a value-oriented strategy focused on opportunities outside the megacap tech-dominated S&P 500. His approach targets fundamentally strong companies trading at single-digit price-to-earnings multiples. Nygren specifically highlights Corebridge Financial (CRBG), noting its low valuation at five times earnings and a significant capital return program centered on share repurchases over the next five to seven years. He also identifies Delta Air Lines (DAL) as an attractive, underperforming asset, with its stock down 4% year-to-date despite a strong balance sheet relative to peers, favorable pricing power, and a July forecast that topped estimates with bookings stabilizing. The third pick, Merck (MRK), is presented as a compelling case based on its diversified portfolio of assets, including profitable vaccines, a stable animal health business, and a promising oncology pipeline involving Keytruda combination therapies, which offer potential for significant future growth.

Key Decisions for Investors

• Investors should consider diversifying portfolios away from the S&P 500's high concentration in megacap technology by seeking value opportunities in non-tech sectors with single-digit P/E multiples.
• Corebridge Financial (CRBG) warrants evaluation for portfolios focused on capital returns, given its 5x P/E valuation and management's explicit commitment to aggressive, long-term share buybacks.
• For contrarian or recovery-focused mandates, Delta Air Lines (DAL) may be attractive due to its recent share underperformance, strong balance sheet within its sector, and improving margin environment.
• Consider Merck (MRK) for exposure to the pharmaceutical sector, as its value proposition is supported by diversified revenue streams and potential long-term catalysts from its oncology pipeline.