Market volatility in July highlighted the risks of crowded trades linked to the AI boom and semiconductor stocks. Trivector Research suggests that investors look towards 'non-tech compounders' to diversify their portfolios while still targeting growth.
Adam Parker, founder of Trivector Research, emphasizes that these companies can mitigate risks if AI leadership broadens or market volatility increases. The firm screened the largest non-technology companies, focusing on those with strong free cash flow margins and positive price momentum.
Notable companies identified include Eli Lilly, which reported a 48% increase in second-quarter revenue to $23 billion, driven by its obesity drugs, and raised its full-year outlook. Parker-Hannifin also showed strong performance with record sales of $5.8 billion, while Tapestry benefited from strong sales at Coach, raising its full-year outlook as well.
These companies exemplify the potential of non-tech compounders to deliver robust returns in a shifting market landscape