Forget Nvidia: Here are four stocks one investor is betting on instead

Published Mon, Mar 25 20247:12 PM EDT

Amala Balakrishner @in/amala-balakrishner @_amalabk

Chipmaker Nvidia has been in the spotlight over the past year, especially since its shares logged an astronomical 240% rise in 2023, on the back of the artificial intelligence buzz. Its popularity shows little sign of abating. The stock is up around 19% so far this month, and 90% over the year to date. Still, one investor is steering clear, saying the stock looks far too expensive. "Even if some may say it's not as expensive because earnings have gone up dramatically ... when you see stocks start to triple over a year and a half to become one of the top on the S & P 500 , you need to be cautious," said David Dietze, managing principal and senior portfolio strategist at Peapack Private Wealth Management, which has over $10 billion of assets under management and administration. "In my experience, you want to stay away from these stocks when everyone is focusing on how magnificent it is and look for things with more reasonable valuations instead." Instead, the veteran wealth manager is now looking for stocks in growth sectors that look "reasonably valued." He said the pharmaceutical, real estate, energy and financial sectors were on his radar, and named four stocks that stand out. Pfizer Pharmaceutical company Pfizer — well known for its Covid-19 vaccine — is betting on cancer drugs , following its $43 billion acquisition of Seagen last year . "We are very enthusiastic about this. Segen is an oncology specialist and has a huge market so there is a lot of potential for Pfizer to grow as the segment of its business expands," Dietze told CNBC Pro on March 12. He sees Pfizer as "the perfect example" of a company with "strong research and development capabilities, great marketing and a great sales force — not just in the U.S. but globally." His optimism comes despite a rocky 2023. Demand fell for its Covid vaccines, its twice-daily weight loss pill fell short in clinical trials, and it forecast profit and revenue for 2024 below expectations. The company has since announced a $4 billion cost-cutting program. Shares in Pfizer are down around 32% over the last 12 months and 5% over the year to date. However, Dietze also highlighted the company's relatively high dividend and relatively low forward price-earnings (P/E) ratio — which divides a company's share price by its expected earnings per share — of around 12. "So you're being paid to wait for Wall Street to better appreciate the stock. And you're buying low when it could still have a great future," he said. Analysts' average price target on the stock is $31.37, giving it around 14% upside potential, according to FactSet data. Realty Income In the real estate space, Dietze likes Realty Income . The REIT says its portfolio includes over 13,000 commercial properties with a 98.8% occupancy rate. "It is a defensive stock and may not be as volatile as non-dividend paying stocks," he said. "The stock and the REIT group are out of favor because interest rates have risen. Yet this could be a good pick because interest rates are coming down and much of the concerns in commercial real estate due to more people working from home may be priced in." He also flagged that Realty Income has a triple net lease structure, which means its tenants are responsible for all expenses, and it pays out dividends monthly, unlike many REITs which pay out on a quarterly basis. Shares in the REIT are down around 14.5% over the last 12 months. FactSet data shows that 8 analysts have a buy rating on the REIT, while 10 give it a hold rating. Analysts' average price target for the stock is $61.18, giving it around 17% potential upside. SLB Oil services giant SLB — previously known as Schlumberger — was also among Dietze's picks. The company offers a range of services to the oil industry, such as well testing, drilling and data processing. "They are in the forefront of using new technology to assist companies owning energy fields," he said. "They don't own the property but they provide the technical know-how to extract it. And they have a long track record of being the largest oilfield service [provider] in the world." He highlighted that 20% of the company's revenue comes from its new technology capabilities. With a forward price-to-earnings ratio of around 15 times, Dietze also said SLB looks a lot cheaper than it used to. "They're very profitable because it's a less capital-intensive business. The returns on invested capital are projected to continue strongly in two years," he added. Over the last 12 months, shares of SLB are up around 21%. According to Factset data, of 33 analysts covering the stock, 31 give the stock a buy or overweight rating, while 2 have a hold rating. Their average price target is $68.12, giving it around 26% potential upside. Comerica In financial services, Comerica was a standout name for Dietze given its progress in commercial banking in the U.S. and more recently in Canada. "Because of their size, and commercial relationships, they have great cost advantages and there's high switching costs for their borrowers to go elsewhere," he said. "They have one of the highest proportions of non-interest bearing deposits in the marketplace and over 50% of that coming from the corporations, who get a preferred borrowing rate." Things have not always been rosy for the bank, which also has a retail banking and wealth management arm. Comerica faced the risk of being booted from the S & P 500 index last October after its market capitalization fell below the $14.5 billion required. While it remains in the index, its market cap is now around $6.84 billion. Over the last 12 months, shares of Comerica are up around 28%, although they are down 7.5% year-to-date. According to Factset data, analysts' average price target on the stock is $59.45, giving it around 15% potential upside.