Market volatility in July reminded investors of the risks tied to increasingly crowded trades powered by the artificial intelligence boom and a massive run in semiconductor shares. Trivector Research sees opportunities in what it calls 'non-tech compounders' for investors looking to diversify beyond AI without compromising on a company's growth characteristics.
'Non-tech compounders can play an important role in portfolios if AI leadership broadens or volatility increases,' wrote Adam Parker, founder of Trivector Research.
Trivector's list of thematic baskets of stocks is designed around the need to diversify away from stocks that are among the most crowded in the market. The firm screened the 1,000 largest, non-technology companies by market capitalization, looking for those with free cash flow margins in the top third.
Companies in the bottom decile for free-cash-flow conversion were excluded, and stocks needed to have been in the top half of the market for three-, six-, and twelve-month price momentum.
The resulting selection of stocks spans health care, consumer staples, industrials, and consumer discretionary companies. Eli Lilly is the biggest company by market value to make the cut.
The drugmaker exceeded expectations and widened its edge in obesity drugs.
'Lilly is building for the future. With our next-generation weight-loss medicine retatrutide and its complete clinical data package in hand, new manufacturing capacity coming online and exciting new assets entering our pipeline through business development, Lilly's future, after 150 years, has never been brighter,' CEO David Ricks said at the time.
