“I’m looking for companies that are cheap,” said Goodman, gushing over two of his recent picks: Photronics, a supplier for chip makers, and consumer-lender Medallion Financial.
No one will ever confuse Medallion for one of the so-called Magnificent Seven tech companies. But after months of trading in response to the latest economic and geopolitical headlines, the mosaic of stocks that comprise the market are beginning to flash their differences. And individual investors like Goodman are taking note, eschewing megacap tech stocks for undervalued, and overlooked, potential gems. Yes, investors and analysts say, it is fun—and possibly rewarding—to pick stocks again.
“It’s been this macro story, and most stocks are up having nothing to do with company management or earnings or sales,” said Michael Kantrowitz, chief investment strategist at Piper Sandler. “It has not been a stock picker’s market, and I think it will be going forward.”
Sky-high valuations on the market’s tech heavyweights have left investors in search of less-expensive alternatives. What’s more, the Trump administration’s trade policies haven’t affected all companies the same way, creating winners (and losers) for research-driven investors to discover.
Stocks in the benchmark S&P 500 index are moving less in lockstep now than at any point since February, when the market was still rallying on the results of the 2024 presidential election.
Sam Yocum, 57, watched the rally in big tech stocks and began to grow skeptical that the artificial-intelligence boom that underpinned their rise was fully justified. In recent weeks, he picked up additional shares of power providers Duke Energy and Edison International.
“It’s getting this kind of ’90s, dot-com bubble feel to it,” said Yocum, a California-based private-equity executive. “I will be looking for other opportunities…the basic, fundamental good-value companies.”
He isn’t the only one skeptical of richly priced tech stocks like Nvidia, Microsoft and Broadcom, whose shares are looking expensive relative to their earnings. Valuations are high in the broader sense, too: As of Thursday, the S&P 500 was 22.5 times its expected earnings over the next 12 months, according to Dow Jones Market Data, compared with a 10-year average of 18.8.
Analysts note that valuations themselves can’t predict market movements, and stocks can trade at high valuations for long periods. “That being said, this is a massively, massively expensive market,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.
Traders are watching for other signs of market froth as well, including speculation in meme stocks and a cryptocurrency frenzy that has driven the price of bitcoin to records.
Some analysts warn that the recent wave of optimism stands at odds with a number of unresolved risks on the horizon in the latter half of 2025: The specifics of tariff policy aren’t yet finalized, and the Trump administration’s self-imposed Aug. 1 deadline for striking deals looms. There are also early signs that U.S. policies are lifting the inflation rate, which could prevent the Federal Reserve from making much-anticipated interest-rate cuts later this year.
“Stocks are not showing any fear about tariffs, they’re not showing any fear about policy uncertainty related to stability or instability in Washington, they’re not showing fear any longer about inflation,” Shalett said. “This is a market that’s pricing [in] Goldilocks.”
Picking the “right” stocks might not help investors avoid losses should the market endure a broad selloff. And hunting for bargains remains less popular than chasing the fastest-growing market names: Investors have added $25 billion more than they have pulled from value-oriented stock exchange-traded funds so far this year, according to Morningstar Direct data, compared with about $47 billion of net inflows into growth ETFs.
But some investors are done chasing the crowd. Angel Diaz, a quality systems auditor in Lubbock, Texas, has been trimming his holdings in the Magnificent Seven companies since the start of the year, though they once made up more than half of his portfolio.
Instead the 64-year-old said he is opting for less popular names such as AES, a utility, and Two Harbors Investment, a real-estate investment company he recently purchased for its quarterly dividend.
“I don’t want to be dependent on the Mag Seven performing as they have in the past,” Diaz said, adding that stability has become more important to him than growth as he nears retirement. “I’ll keep myself invested in the market, but at the same time take a lower-risk approach with less volatility.”
It’s a good time to be a stock picker, he said, “if you’re doing your research.”
Write to Hannah Erin Lang at hannaherin.lang@wsj.com