Bill Nygren: Opportunities Still Exist Outside The Mag 7

As the Nasdaq touches all-time highs, driven by strength in tech and the Magnificent Seven, investors are rightfully questioning where opportunity lies beyond this intense concentration.

Oakmark Funds’ Bill Nygren, joining CNBC, argues that the S&P 500’s reputation as a relatively low-risk investment has “obscured the fact that it’s a technology mega-cap fund today.”

This has created a blind spot for many portfolios, pushing them toward companies with exceptionally high expectations already baked into their share prices.

Nygren’s approach is fundamentally different. His firm seeks value in companies “that don’t have such high expectations built in,” resulting in portfolios where price-to-earnings multiples are “less than half of what the S&P 500 is.”

He highlights several specific names trading at single-digit P/E ratios that span various sectors, not just cyclical industries.

These include “Corbridge Financial, which is retirement services… about six times expected earnings, Delta Airlines about seven times expected earnings.”

The investment thesis for these companies isn’t reliant on explosive growth but on disciplined capital return. As Nygren explains, with Corbridge, “they’re putting most of their capital into share repurchase… in 5 to 7 years, if the stock doesn’t move, they would be taking out the entire market cap of the company.”

This creates a powerful engine for per-share growth even with modest top-line expansion.

Regarding Delta, Nygren acknowledges the high-cost environment but points to underlying strength. “The reason that ticket is so expensive is because demand is strong for travel next year,” he states, adding that this has been a “tough environment for the discount airlines,” allowing majors like Delta to strengthen their pricing power and margins.

Perhaps the most compelling case is pharmaceutical giant Merck. While “everybody’s worried about Keytruda coming off patent,” Nygren contends that “the runoff value is more than the stock is selling for today. And you get the whole R&D effort for free.”

He further notes that Merck has “some other really interesting assets,” including strong vaccine franchises and a pipeline exploring combinations of Keytruda with other drugs to target specific cancers more effectively.

For investors heavily indexed to the S&P 500, Nygren suggests considering a fund invested more like a Russell value index, or of course, an Oakmark fund, to capture these overlooked opportunities where the margin of safety is far wider.

You can watch the entire interview here: