Tech stocks continue to dominate the investing conversation on Wall Street – hardly a new development, but this month, the dialogue has turned slightly more bearish than what we’re used to. With the latest artificial intelligence (AI) models threatening to upend entire industries, investors are now chattering about the possibility of a “software Armageddon” that could wipe out legacy blue-chips.
And up at the very top of the tech food chain, massive AI spending forecasts by the Magnificent 7 has revived concerns about how much of that mega-capex will yield tangible results for investors in terms of future profits.
With so much attention centered on whether it’s time to "buy the dip" in software, and whether the Mag 7 can continue to lead, it’s very easy for investors to overlook the opportunities taking shape beyond tech – and yes, they do exist!
Healthcare Looks Healthy
We’ve already highlighted the technical strength on display across the traditionally high-yield sectors of materials, consumer staples, and energy. But the healthcare sector, excluding the managed health space, has also been outperforming.
This is an investment thesis I’ve been following since last year, and the bullish case has been gathering strength – particularly as the case for tech gets more complicated.
In January, healthcare accounted for 82,000 of the 130,000 jobs created that month. “As we see the population aging pretty significantly, there’s going to be a lot more demand for healthcare services,” ZipRecruiter’s Nicole Bachaud explained to Barron’s.
Adding to the narrative, if we are in a “correction” market top – or in the worst-case scenario, potentially entering into a bear market – then the defensive healthcare space is traditionally the sector to be in.
One healthcare stock that stands out is AstraZeneca (AZN), which currently ranks among the Top 1% on Barchart’s Technical Opinion Strength list.
For those interested in seeking out more investment opportunities across healthcare, here are a few subsectors to consider:
- Medical Services and Products
- Dental Suppliers
- Biomedical
- Big Pharma
- Healthcare REITs
My Favorite Stock to Trade
Of course, it’s nearly impossible to avoid the AI theme altogether – and that’s where my favorite stock to trade comes in.
Note the difference between “investing” and “trading” here: Alcoa (AA) is purpose-built for a good time, and not for a long time. The stock has an Average True Range (ATR) in excess of $3 and 5% ATR to price, which is not a recent development; it’s been characteristic of the stock for years.
This kind of robust price action makes for great day trading, options selling, and – when it’s trending directionally – a monster price percentage mover.
And the AI connection? From a practical perspective, increased manufacturing for autonomous cars, robots, and more smart gadgets should continue to drive demand for metals.
Also On My Watchlist This Week
In case you missed it, I’m tracking the surprising correlation between Bitcoin (BTCUSD) and the software stocks ETF (IGV) – which suggests that the digital asset has been fully absorbed into the broader tech ecosystem.
Separately, alternative energy IPOs are heating up. Last week, solar and battery storage company SOLV Energy (MWH) debuted at $30 per share on Nasdaq, fetching a higher-than-anticipated $6 billion valuation. SOLV, which boasts an $8 billion backlog, has major clients like Intel (INTC) on its roster; the company is working on utility-scale solar for the semiconductor giant’s Arizona facility.
And coming up, geothermal specialist Fervo Energy, which has collaborated with Google (GOOG) (GOOGL) to power data centers, is expected to make its public market debut over the summer.
I'm generally not a big fan of buying IPOs, as they tend to retreat after the initial wave of hype. However, these companies are in the engineering, procurement, and construction (EPC) energy niche, which is where I want to be over the next decade – so they’ve earned a spot on my watchlist, as I believe this clean, renewable, and dependable power could be the next disruption in the energy space.
– John Rowland, CMT, is Barchart’s Senior Market Strategist and host of Market on Close.
On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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