The big question right now, as we head toward the end of 1Q25, is whether or not the bull run of the last two years will continue. The key to that could lie in the tech sector, and especially in AI.
Watching current market conditions, Morgan Stanley’s senior portfolio manager, Andrew Slimmon, believes that AI may trigger a ‘90s-style productivity boom. That brings potential for both reward and risk – after all, we all know how the ‘90s tech bubble ended. But, as Slimmon notes, the tech giants today are trading at a discount compared to their predecessors of 2000, making a bubble burst in the near term less likely.
Nevertheless, Slimmon recommends that investors start to diversify their portfolios and has a concrete idea of how.
“Currently, big tech is heavily owned individually and within the indices. This ultimately can result in big swoons when news, such as the introduction of a Chinese large language model, comes out like it did in the last week of January. However, I wouldn’t actively bet against the major tech companies that comprise the biggest weights in the S&P 500. When the dotcom bubble peaked in 2000, the big titans of that era traded at 50-75x forward price-to-earnings ratios. Today, most of the mega-caps trade at roughly a 50% discount to these previous peak multiples. Additionally, investors should consider more than simply growth equities, especially financials,” Slimmon opined.
That aligns with the research of fellow Morgan Stanley analyst Bob Huang, who has been closely tracking financial stocks – he has identified two names from his coverage that stand out as strong investment opportunities. Using TipRanks’ database, we can also see how the rest of the Street feels about these names. While tech remains the market’s driving force, these financial plays could offer a compelling counterbalance – so let’s take a closer look.
Corebridge Financial (CRBG)
We’ll start with Corebridge Financial, a financial services firm that spun off from the insurance giant AIG in the fall of 2022. Today, Corebridge operates primarily as an insurance provider, offering a range of policy products in the US markets, including life insurance, annuities, and employer retirement plans. The company also offers retirement planning for individuals, as well as asset management services.
Since becoming a publicly traded entity, CRBG shares have performed strongly and in addition to its solid stock performance, Corebridge has also become a reliable dividend payer. The company has paid out common share dividends in every quarter since it went public, although it does adjust the payment to ensure that it is sustainable. The current dividend, of 24 cents per share, was declared on February 12 for a March 31 payment. This is up a penny from the previous quarter’s payment, and the annualized rate of 96 cents per common share gives a forward yield of 2.8%.
Looking at Corebridge’s latest set of financial results, covering 4Q24, we find that the company generated an adjusted pretax operating income of $878 million, realizing operating EPS of $1.23. This was a marked increase from the $1.04 recorded in 4Q23 and beat the estimates by 3 cents per share.
Morgan Stanley’s Bob Huang notes that Corebridge has proven adaptable in meeting changing business conditions—a key point in any company’s success. He is also upbeat about the company’s prospects for growing its customer base and writes, “Management has frequently spoken to its nimble operating model that allows the company to quickly adapt to market conditions. As we approach a less favorable environment for spread based products, Corebridge has demonstrated its ability to pivot toward fee-based earnings, notably within its group line of business. Over the last 12 months, management has reduced spread exposure from 51% down to 44% within group insurance, which reflects targeted actions to grow the company’s advisory and brokerage capabilities. Corebridge’s group insurance business serves 1.9 million customers; of those, 1.7 million are pre-retirement, and most are not currently using advisory services. This market should be a large opportunity to grow the wealth management business longer term, providing EPS uplift going forward.”
Considering these factors, Huang rates CRBG shares as Overweight (i.e., Buy) and complements this with a $43 price target to imply a one-year upside potential of 34%. (To watch Huang’s track record, click here)
This stock has picked up 11 recent analyst reviews, and all are positive, naturally making the consensus view here a Strong Buy. Corebridge shares are currently selling for $32.06 and have an average target price of $39, suggesting the stock will gain 21.5% over the coming year. (See CRBG stock forecast)
Voya Financial (VOYA)
Next on our list is Voya Financial, a finance company that deals in both insurance and financial services. The company offers a wide range of policies and plans for health and life insurance, and for wealth and investment management. Voya has $894 billion in total assets under management as of the end of 2024 and touts its credentials as one of the 50 largest institutional asset managers on the global scene. True to that scale, the company has some 15.7 million customers – a combination of individual, workplace, and institutional clients.
Working with such a large range of clients, Voya naturally offers a wide range of services and products. These include retirement planning, employee benefit planning, and investment fund management. Voya simplifies financial decisions for individual retail customers while making available large-scale benefit and health policies for businesses and institutions. Life insurance holds a prominent role in all of these areas, providing protection for Voya’s customers.
Like many insurance and finance companies, Voya is well known for returning capital to its shareholders. In 2024, the company returned capital to the value of $800 million through a combination of share repurchases and dividend payments. The common share dividend was last declared on January 30 at a rate of 45 cents per share and is scheduled for payout on March 27. The dividend gives a forward yield of 2.5%, based on the annualized rate of $1.80 per common share. Voya has been raising the dividend payment regularly since 2019.
Turning to the company’s financial results, we find that Voya last reported results for 4Q24, in which it showed top-line revenues of $2.01 billion, up 10% from the $1.82 billion in 4Q23 – and beating the forecast by $120 million. On the bottom-line, non-GAAP EPS came in at $1.40 – 65 cents per share ahead of the estimates.
However, the company missed its EPS target for the full year, although Morgan Stanley’s Bob Huang does not think that reflects badly on the business. He writes, “Though 2024 full-year EPS of $7.25 fell short of guidance of $8.25-8.45, during 4Q24 earnings, management provided a sensible turnaround strategy that gives us conviction in Voya’s long-term growth profile. Headwinds, particularly in Health Solutions, should abate, results should stabilize, and both EPS and ROE should inflect higher in the coming years. Further, the stock is currently trading below historical average, but is much less capital intensive. We believe the current valuation overly penalizes execution risks and does not fully reflect Voya’s potential.”
These comments support Huang’s Overweight (i.e., Buy) rating on the stock, while his $87 price target points toward a gain of 25% on the one-year horizon.
The 11 recent analyst reviews here, with their split of 5 Buys to 6 Holds, give the stock a Moderate Buy consensus rating. The stock has a current trading price of $69.54, and its $81.80 average price target implies a 12-month upside potential of 17.5%. (See VOYA stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.