Don't want to chase Big Tech? Money manager flags three unloved stocks to bet on now.

By Barbara Kollmeyer

Critical information for the U.S. trading day

The Bank of Japan's long-awaited rate hike did not set the financial world on fire. Neither did Nvidia's new AI chip lineup. That's as investors are focused on the outcome of this week's Fed meeting.

And Nvidia's 240% run over the last 12 months may mean many investors are wary of potentially buying at or near the top.

Onto our call of the day, from Matrix Asset Advisors President and CIO David Katz, who flags a handful of hard-hit stocks and sectors that investors with slightly longer-term horizons should be thinking about now.

And it doesn't have much to do with getting tangled up in Fed rate-cut timing or chasing stock winners.

"We think the critical thing for investors is not to get obsessed with the exceptionally near term. Understand that the Fed and the other central banks are likely to be more dovish as the year progresses. And if you're investing today, markets are going to discount that sooner rather than later," Katz told Bloomberg Radio.

The money manager also sees a rotation ahead, nodding to the slowing appetite for some of U.S. Big Tech, and he's not keen to "chase" those names.

He sees "lots of opportunities" in health care and financials, sectors which have been rebounding this year from a weak 2023.

Utilities, which are no better off this year than last, are also good for those investors with a six to 12-month time horizon, especially if the economy starts to slow down and the Fed begins to work in rate cuts. he says. It's a "nice place to make money with much lower risk," said Katz, of the sector.

One stock he flags is Cisco (CSCO), down over 2% so far this year, as a "second-derivative AI play." Over-ordering among clients last year resulting in lots of the networking company's orders being cancelled, which made a "two or three-quarter slowdown in their revenues." But Katz thinks "the worst is behind" Cisco, and while no fireworks, the stock has about 15% to 20% upside, low risk and a fit for an investor with a 12-18 month time horizon.

Katz also likes Starbucks (SBUX), which "makes an addictive product that is generally is pretty safe for people," and has a "great footprint" globally. He notes the hit the stock has taken over the past six months has stemmed due to worries about China, but is optimistic about stimulus coming from that global growth engine. He also likes the new CEO Laxman Narasimhan and the fact Gen Z is keen on Starbucks' coffees and other products.

"We think they are going to be a force to be reckoned with and you're getting it at a very good price," he says.

Finally, on the roughly one-year anniversary of the U.S. banking crisis, the money manager highlights PNC Financial Services Group (PNC).

When it comes to banks, it's all about focusing on "the best quality companies. Best credit quality, good commercial real estate portfolios and conservative financing. PNC meets that." The same goes for U.S. Bancorp (USB) and Bank of New York (BK), but he avoids the "lower-quality companies" owing to an uncertain risk picture.

"We think if the Fed starts lowering rates and we don't have a recession, which we're not forecasting, these companies should do quite well," he said.

The markets

Stocks SPX are trading weaker, notably tech COMP, with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y also dropping. Gold prices (GC00) are slipping as the dollar DXY climbs, with a 1% jump against the Japanese yen (USDJPY) after the Bank of Japan reset its policy rate from negative-0.1% to a range between 0% to 0.1%, the first hike in 17 years. The Nikkei JP:NIK, which has been on a tear lately, rose 0.7%.

Bitcoin (BTCUSD) is off 6%, hovering at $63,000, and weighing on related stocks like Coinbase (COIN).

The buzz

Housing starts came in stronger than expected. The Fed's two-day policy meeting is kicking off later. See MarketWatch's Live Blog

After a nearly 1,000% rally, server maker and Nvidia partner Super Micro (SMCI) plans to sell stock.

Nvidia (NVDA) late Monday unveiled its highly awaited Blackwell chip lineup, but shares, up about 240% over the past year, are down over 2%.

Read: AI brings existential crisis for Apple, Salesforce and tech's old guard: Partner or perish

Spire Global stock (SPIR) is up after the space-based data and analytics group announced a collaboration with Nvidia to boost weather prediction.

Fusion Pharmaceutical shares (FUSN) are up after AstraZeneca (AZN) announced a $2.4 billion deal to buy the radiopharmaceutical group.

Unilever stock (UL) rose as the consumer products group said it would cut 7,500 jobs and possibly spin off its ice cream-making unit.

XPeng (XPEV) shares are climbing after blowout results from the China EV.

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Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   SMCI    Super Micro Computer 
   AAPL    Apple 
   MSTR    MicroStrategy 
   SOUN    SoundHound AI 
   TSM     Taiwan Semiconductor Manufacturing 
   AMD     Advanced Micro Devices 
   NIO     Nio 
   GME     GameStop 

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-Barbara Kollmeyer

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03-19-24 0951ET

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