Do you suffer from TMT—Too Much Tech? Even if you think you are diversified because you own index funds, the technology sector now constitutes 33% of the S&P 500 index, the most since the early 1970s. In fact, the influence of just a handful of volatile mega-cap tech stocks is the reason for much of the S&P 500’s gains and losses this year. 

To help reduce your portfolio’s dependence on tech without compromising the potential for high returns, Bottom Line Personal asked four top investment experts to highlight other niches of the stock market that look attractive now.

RICHARD SAFRAN
Seaport Research Partners

Defense: Not everyone wants to own the stocks of weapons ­manufacturers—but the world is becoming more dangerous with multiple hotspots in the Middle East, South China Sea and Eastern Europe. The US Department of Defense has requested nearly $850 ­billion for fiscal year 2025, almost half of all federal discretionary budget outlays. That amount is likely to keep rising due to decades of underinvestment in modernizing weaponry, as well as the need to counter US adversaries as they strengthen their own military capabilities. Stocks that I have “buy” ratings on now…

Boeing Co. (BA). The iconic aerospace company’s stock has fallen 34% this year. This hybrid manufacturer is a riskier play with more potential upside than a pure-play defense firm. The defense division has continued to thrive with a recent $2.56 billion contract from the US Air Force for the E-7A Wedgetail, an “eye-in-the-sky” airborne warning-and-control aircraft that flies over battle spaces gathering information and tracking troops. But Boeing’s Defense business has its share of issues too—nearly $250 million in charges on the KC-46A Pegasus tanker due to parts problems, fixed-price development programs, etc. These issues should end, but Boeing’s defense business currently isn’t making much money for the company. And ­Boeing’s commercial jet division has been embroiled in multiple legal and public relations challenges related to manufacturing flaws in its 737 MAX jets. The company’s new CEO, respected aerospace veteran Kelly Ortberg, has a chance to turn around operations. Recent share price: $149.29.*

Northrop Grumman (NOC) is one of the world’s premier defense firms with guaranteed long-term contracts that insulate it from inflation and economic and interest rate cycles. The company makes AARGM-ER supersonic missiles for counter-air-defense systems and the new B-21 stealth bomber, which will generate more than $200 billion in revenue over the next three decades. It has recently completed full-scale deep-sea trials of a new drone submarine for the US Department of Defense. Dubbed the Manta Ray, the vessel anchors to the seafloor and hibernates in a low-power state until needed to engage enemy submarines. Recent share price: $496.87.

Richard Safran is a managing director and senior equity analyst for aerospace and defense at Seaport Research Partners, Chicago. 
SeaportRP.com

COULTER REGAL, CFA, VanEck

Nuclear energy. Nuclear power has been out of favor for decades after meltdowns at plants in Russia and Japan. In the US, only two new nuclear plants have been built since 2000. I expect a resurgence in the industry thanks to several catalysts…

Fighting climate change. Nuclear power is a viable alternative to fossil fuels—it generates a substantial amount of electricity with minimal greenhouse gas emissions. Nuclear power generation is more consistent and reliable than intermittent sources such as solar and wind energy.

Booming demand for electricity from heat pumps, electric vehicles and data centers built to handle artificial intelligence systems. By 2030, electricity demand at US data centers could triple, using as much power as 40 million homes.

Safety improvements. Recent innovations such as more efficient reactor designs have reduced risk for accidents at nuclear plants and made core meltdowns almost impossible. 

Two stocks our fund owns now… 

Cameco Corp. (CCJ) operates or owns interests in uranium mines in Canada, Kazakhstan and the US, producing as much as 18 million pounds of uranium annually. Uranium—the price of which hit 16-year highs this year—is the fuel widely used for nuclear fission to generate electricity. In March 2024, the US government banned the import of uranium from Russia and is spending $2.72 billion to ramp up local uranium fuel production. Recent share price: $60.11. 

Public Service Enterprise Group (PEG) provides regulated gas and electricity services to 4.2 million customers in New Jersey. It is in negotiations to provide electricity to major data centers from its Hope Creek and Salem power plants in southern New Jersey. PSEG has established regulatory relationships that support what could be $20 billion of capital investment during the next five years. Its stock recently yielded 3% and has paid a dividend every year since 1907. Recent share price: $92.40. 

Coulter Regal, CFA, is a product manager at VanEck, a New York City–based investment firm with $90 billion in assets. He specializes in natural-resource offerings, including the VanEck Uranium and Nuclear ETF (NLR) ETF. VanEck.com/us

CHRIS SEMENUK, Tema ETFs

Reshoring. For decades, US manufacturing migrated overseas, mostly to China, attracted because of low labor and production costs and international trading agreements. But no longer. ­Deglobalization is in full swing. Geopolitical tensions, supply-chain disruptions, and rising wages in China have undermined the cost advantages of foreign manufacturing and exposed the risks of depending on faraway industries to make critical goods such as computer chips and medicines. Dozens of major US manufacturers have begun “reshoring,” or bringing outsourced manufacturing operations back home. Apple recently broke ground on a new billion-dollar facility in Austin, Texas, and General Motors plans to spend $4 billion to expand its electric-vehicle production in Michigan. Two stocks our fund owns now…

Clean Harbors (CLH). The US generates more than 350 million tons of hazardous waste a year, and that number is expected to rise as domestic manufacturing increases. Clean Harbors controls 70% of the US market for hazardous-waste cleaning and disposal and emergency spill response, serving a majority of industrial and automotive companies in the Fortune 500. The company, which began as a four-person tank-cleaning business, is also North America’s largest re-refiner and recycler of used oil, processing more than 200 million gallons a year. Recent share price: $252.50.

Parker Hannifin (PH). Some investors think of this company as a stodgy, boring industrial manufacturer. But its products—hundreds of small components such as seals, filters, hydraulic pumps and electromechanical systems—are essential. They help run everything from tractors to Army ground combat vehicles to semiconductor-chip plants. The 105-year-old Parker Hannifin is so well-run that it has posted 30 straight years of positive free-cash-flow generation and profitability. Not only is the company relocating its own manufacturing back to the US to reduce costs and better control its supply chain, but it also will benefit from a surge in construction of new semiconductor-manufacturing facilities in the US. Recent share price: $706.87. 

Chris Semenuk is a partner at the fund-management firm Tema ETFs, New York City, and lead manager of the Tema American Reshoring ETF (RSHO). For nearly 20 years, he was manager of the $5 billion TIAA-CREF Global Equities Fund. TemaETFs.com

ANDREW CHANIN, ProcureAM

Outer space. For investors, outer space isn’t about exotic missions. It’s more practical. Companies and governments are launching small communications, surveillance and data-network satellites into low-earth orbit (LEO) to speed data transfer and improve mobile phone and GPS reliability. The global space economy is expected to soar to $1.8 trillion in 2035, up from $630 billion last year, according to research organization McKinsey & Company. Stocks our fund owns now…

AST SpaceMobile (ASTS) is building an LEO cellular broadband network that can provide phone reception anywhere in the world, whether you are on top of a mountain, on the ocean or in areas without nearby cell towers. Unlike Elon Musk’s SpaceX, which mainly provides mid-band spectrum coverage for underserved areas and uses its own hardware, this satellite provider will offer lower-band connections that can be directly accessed by everyday smartphones. The company already has signed deals with AT&T and Verizon. Its first five commercial satellites, called BlueBirds, launched at the end of 2024. Recent share price: $24.10.

Rocket Lab USA (RKLB) designs and manufacturers launch vehicles that can provide frequent and reliable access to space for government, defense and commercial payloads. Rocket Lab USA has completed 10 launches as of late August 2024 with its 59-foot-high reusable Electron rocket. It also has a backlog of more than $1 billion in launch orders including a Pentagon satellite contract. The company is currently testing its 141-foot-high Neutron rocket designed for the deployment of satellites, deep-space missions and human space flight. Recent share price: $23.26.

Andrew Chanin is CEO and cofounder of the asset-management firm ­ProcureAM, Levittown, Pennsylvania, which launched the Procure Space ETF (UFO) in 2019. 
ProcureETFs.com

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