While markets are trading close to all-time highs, the upside is still primarily driven by mega-cap tech stocks that are part of the artificial intelligence (AI) race, such as Oracle (ORCL). However, several companies in sectors such as real estate, consumer discretionary, and energy are still trading at lower valuations, as investors are worried about slower consumer spending, elevated interest rates, and the lingering prospect of an economic slowdown.
Lululemon (LULU) and Dollar Tree (DLTR) are two large-cap stocks trading significantly below their record highs, which could make them attractive to value and contrarian investors. However, investing in beaten-down stocks is a tricky strategy, as you need to identify whether the pullback is due to macroeconomic factors or company-specific issues.
