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The broader stock market has soared this year, bolstered by the outperformance of the biggest titans of technology. Specifically, the Magnificent 7 stocks have boosted all three major stock indexes, which are on pace to end both the fourth quarter and the full year higher than they began. The broader S & P 500 is up more than 18% on the year, the Dow Jones Industrial Average has gained 9% and the tech-dominated Nasdaq Composite has surged about 35%. But even as the technology and communication services sectors have taken center stage, other stocks have lagged. The S & P Regional Banking ETF, for example, is lower by 19%. Utilities are down 10%. Energy stocks are off almost 8%. And just because the tech stalwarts made big gains in 2023 doesn’t mean that the pattern will continue into 2024. “Over the past 21 years, there has been a tendency for calendar-year laggards to outperform in the subsequent first quarters,” wrote Goldman Sachs analyst Deep Mehta in a report earlier this week. Chris Senyek, chief investment strategist at Wolfe Research, agreed, telling CNBC’s ” Closing Bell: Overtime ” on Tuesday that going into the new year he’d rather own the groups of stocks that have lagged so far in 2023. “Our most out-of-consensus view is that the ‘Magnificent 7’ as a group is likely to underperform the ‘Other 493’ in the year ahead,” Senyek wrote in his 2024 outlook. “This call is largely based on our belief that ‘Mag 7’ companies will ultimately be more cyclical than expected in a slowing [economic] environment.” In the same report, Senyek highlighted a screen of stocks that are trading at cheap valuations and that are “unloved,” as reflected in fewer buy recommendations from sell-side research analysts. Here are a few of the companies that made Senyek’s list: Scotch Tape and Post-It manufacturer 3M turned up, with a year-to-date return of -12%. No analysts covering the stock currently recommend it as a buy. Earlier this month, Barclays upgraded 3M to equal weight from underweight, citing a likely revenue recovery. “We think the top line should be due for a recovery in 2024 after two weak years,” wrote Barclays analyst Julian Mitchell. Margin expansion could be above average due to the latest cost-cutting plan, and the evidence of greater cost control.” Shares of Southwest Airlines , also on the list, are down 22% so far in 2023. Currently, only one quarter of the analysts covering the Texas-based carrier give it a buy rating. Melius Research downgraded Southwest in November to a sell from hold, saying that its “strategy to outgrow their issues is not working.” Fertilizer company Mosaic is also cheap and unloved, according to Wolfe. Barclays double upgraded the stock in November to overweight from underweight, citing an improved outlook for potash prices. Other names on the list include Walgreens Boots Alliance , HP and General Mills . — CNBC’s Michael Bloom contributed to this report.
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