Morgan Stanley Fund Manager Advises Investors To Diversify Amid Big Tech Frenzy: Here Are 2 Stocks He Recommends

Aaron Dunn, a portfolio manager at Morgan Stanley, advised investors to diversify beyond the “Magnificent Seven” tech stocks.

What Happened: Dunn, who also serves as co-head of value equity at Morgan Stanley, emphasized the importance of broader market diversification, according to CNBC on Sunday. He highlighted two stocks he finds particularly promising: BJ’s Wholesale Club Holdings Inc BJ and Thermo Fisher Scientific TMO.

"I would say the concentration is troublesome, in our opinion, and it's something to watch. We do tell [clients] we really think a broader diversification of the market is important," Dunn said.

He praised BJ's Wholesale Club for its strong balance sheet, high returns on capital, and robust free cash flows. Dunn noted that BJ's digital footprint and potential for store expansion make it a solid investment.

Regarding Thermo Fisher Scientific, Dunn described it as a leader in healthcare services and biotechnology. He pointed out the company’s diversified portfolio, strong M&A growth strategy, and high recurring revenue. Dunn believes Thermo Fisher is well-positioned to benefit from increased healthcare spending post-COVID.

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Why It Matters: The call for diversification comes amid growing concerns about the valuation of U.S. stocks. Peter Schiff, a noted economist, recently warned that U.S. stocks are “overpriced,” particularly the S&P 500 and other major indices, which have reached record highs. Schiff advised investors to be more selective in their investments.

Meanwhile, seasoned Wall Street investor Ed Yardeni has rebranded the “Magnificent Seven” tech giants as the “Magnificent One,” referring to Nvidia Corp as the key driver of this year’s market gains. Yardeni highlighted that Nvidia has surged by 115% year-to-date, significantly outperforming other tech giants.

Price Action: Shares of BJ's Wholesale Club have risen approximately 31.4% year-to-date, while Thermo Fisher's shares are up around 6.8% in the same period, according to the data from Benzinga Pro.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote