{"id":104529,"date":"2026-02-27T12:58:06","date_gmt":"2026-02-27T15:58:06","guid":{"rendered":"https:\/\/tech.einnews.com\/article\/896162774"},"modified":"2026-02-27T12:58:06","modified_gmt":"2026-02-27T15:58:06","slug":"market-outlook-investors-shift-to-value-and-smallcaps-as-tech-cools","status":"publish","type":"post","link":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/2026\/02\/27\/market-outlook-investors-shift-to-value-and-smallcaps-as-tech-cools\/","title":{"rendered":"Market Outlook: Investors shift to value and smallcaps as tech cools"},"content":{"rendered":"

Whitney Stewart, CFA, executive director and client portfolio manager at Sterling Capital, joins BNN Bloomberg to discuss opportunities as markets broaden. <\/span><\/figcaption><\/figure>\n<\/p>\n
\n

As equity leadership widens beyond mega-cap technology names, investors may find opportunities in areas trading at lower valuations. Value stocks, dividend payers and smallcaps are posting stronger year-to-date gains as parts of the AI-driven rally cool.<\/p>\n

BNN Bloomberg spoke with Whitney Stewart, executive director and client portfolio manager at Sterling Capital, who said the so-called HALO trade \u2014 heavy asset, low obsolescence sectors such as utilities, energy and industrials \u2014 is benefiting from improving earnings trends and demand tied to AI-related infrastructure.<\/p>\n

Key Takeaways<\/h2>\n
    \n
  • U.S. large-cap value, dividend stocks and smallcaps are up roughly five to 10 per cent year-to-date, while the Magnificent Seven have pulled back about five per cent.<\/li>\n
  • Utilities and power infrastructure firms are positioned to benefit from rising electricity demand driven by AI data centre expansion.<\/li>\n
  • Smallcaps have less than three per cent exposure to software, reducing disruption risk tied to generative AI and shifting tech spending.<\/li>\n
  • Valuation gaps remain wide, with some large-cap consumer stocks trading near 55 times earnings versus similar smaller peers closer to 20 times earnings.<\/li>\n
  • Software remains investable but requires selectivity, as falling development costs and aggressive revenue targets from AI competitors could pressure traditional profit pools.<\/li>\n<\/ul>\n
    Whitney Stewart, CFA, executive director and client portfolio manager at Sterling Capital <\/span>Whitney Stewart, CFA, executive director and client portfolio manager at Sterling Capital <\/span><\/figcaption><\/figure>\n

    Read the full transcript below:<\/b><\/i><\/p>\n

    ANDREW:<\/b> For investors looking to broaden their stock portfolios, our guest says there are opportunities in value and dividend payers and small caps, with many still trading at lower valuations compared with the mega-cap tech names. Let\u2019s get more from Whitney Stewart, executive director and client portfolio manager at Sterling Capital. Great to see you, and thanks very much for joining us.<\/p>\n

    WHITNEY: <\/b>Good morning. Yes, we believe that this HALO trade \u2014 heavy asset, low obsolescence \u2014 is pretty interesting. You\u2019re seeing large-cap value, dividend stocks and small-cap stocks in the U.S. up anywhere from five to nine per cent, in a reversal of the winners of the last couple of years \u2014 the Magnificent Seven technology trade. So we\u2019re seeing that as an attractive area on a go-forward basis.<\/p>\n

    ANDREW:<\/b> Remind us, what are these HALO stocks again?<\/p>\n

    WHITNEY: <\/b>Yeah, so heavy asset, low obsolescence. Some of those sectors are industrials, energy and utilities. In the AI space, one of the ways you can play it is through electric grid infrastructure. So we like Southern. We like Eaton. Over the long term, fundamentally, their backlog is very attractive, with consistent cash flows, and they\u2019re not as expensive as some of the tech winners in the AI trade.<\/p>\n

    ANDREW: <\/b>So Southern, symbol SO on the NYSE, sells electricity, is that right?<\/p>\n

    WHITNEY:<\/b> Yeah, exactly. It\u2019s a regulated utility. One way to think about it is as a conservative way to play the demand for AI, which is going to drive a lot of electricity demand, especially in the Southeast. It has very favourable demographics and population growth there. And then Eaton supplies transformers and circuit breakers to the electric grid, which needs to get upgraded anyway. Now you\u2019ve got really attractive, strong demand from all these data centres being built. They\u2019re going to need a lot of power.<\/p>\n

    ANDREW:<\/b> It is interesting with the tension south of the border over electricity prices that people feel are being pushed up by data centres. But I guess that doesn\u2019t hurt the utilities.<\/p>\n

    WHITNEY: <\/b>There are conversations about regulation, so that\u2019s another aspect of evaluating some of these companies. You want to identify companies that have favourable regulatory opportunities, because some local regulators \u2014 and potentially national ones \u2014 are concerned about how prices for consumers may go up. So you do have to do the homework on that.<\/p>\n

    ANDREW:<\/b> And ETN \u2014 their order book must be full to bursting right now.<\/p>\n

    WHITNEY:<\/b> It is very strong and accelerating. Typically, stocks react really well to acceleration. Their customers potentially have hundreds of billions of dollars to spend on capital expenditures \u2014 all the big hyperscalers: Amazon, Microsoft, Google, Oracle. They have a lot of cash flow to build out AI infrastructure, and ultimately that leads to Eaton\u2019s backlog.<\/p>\n

    ANDREW:<\/b> It is interesting, though. Companies like Meta and Alphabet \u2014 for years people loved them because they didn\u2019t have to build factories and plants. But that\u2019s changed radically. They\u2019re having to build hard assets on the ground.<\/p>\n

    WHITNEY: <\/b>Correct. The stocks really worked for the last two or three years, even though they were spending more and more of their cash flow. The market seems to be taking a breather on the Magnificent Seven slash AI trade and broadening out again to U.S. value and dividend stocks. Small caps are up eight, nine, even 10 per cent depending on the index you\u2019re looking at, and they just have less tech exposure. There\u2019s less risk. You\u2019re also seeing the opposite of the software trade, which has struggled. Small caps have less than three per cent software exposure.<\/p>\n

    ANDREW: <\/b>Do you think \u2014 I know this is a bit off topic \u2014 are people being too hard on traditional software stocks?<\/p>\n

    WHITNEY: <\/b>I think it\u2019s going to be a stock-picker\u2019s market. Historically, software has traded at a really high multiple \u2014 ballpark 25 times earnings \u2014 because it\u2019s asset-light. It\u2019s highly recurring, super high margin, a great business. But if the cost of developing software becomes extremely low and potentially disruptable, and those moats go away, then the multiple probably should come down. Some companies do have real moats. Some of those moats are getting eroded. The two big competitors coming from the private world are Anthropic and OpenAI, and they have really high revenue targets. Anthropic is looking at close to $100 billion in revenue by 2029, and OpenAI has raised its target from $100 billion to $280 billion. We\u2019ll see if they get there. But if they get anywhere close, that revenue has to come from somewhere. The software profit pool is at risk. AI is really good at coding. We\u2019ll see. OpenAI reported about $20 billion in annualized revenue at the end of 2025.<\/p>\n

    ANDREW:<\/b> Sorry?<\/p>\n

    WHITNEY:<\/b> OpenAI \u2014 which is ChatGPT. Two or three years ago, they had almost no revenue.<\/p>\n

    ANDREW: <\/b>So it is picking up. You have a couple of retail ideas \u2014 BJ\u2019s Wholesale Club. Just put them in perspective. Are they like a mini Costco?<\/p>\n

    WHITNEY: <\/b>Great question. A good way to think about large cap versus small cap is valuation. Everybody loves Costco. It\u2019s a phenomenal store and has been a great stock. The issue is it\u2019s trading at about 55 times earnings. BJ\u2019s is trading at about 20 times earnings and has the same membership model \u2014 about 90 per cent recurring membership fees \u2014 which makes it very consistent. It has cheap gas and the hot dog and a Pepsi for $1.50 to keep you coming back. But you\u2019re paying 20 times earnings, and the company is a lot smaller. It has a similar business model with, we think, more growth potential in the U.S., because it has a smaller existing store base. Most stores are in the Northeast, and it\u2019s expanding into the Southeast, Florida and Texas, where there is more population growth.<\/p>\n

    ANDREW:<\/b> That\u2019s interesting \u2014 a mini Costco, arguably cheaper.<\/p>\n

    WHITNEY: <\/b>Correct, in our view.<\/p>\n

    ANDREW:<\/b> Thank you very much, Whitney.<\/p>\n

    WHITNEY: <\/b>Of course.<\/p>\n

    ANDREW:<\/b> Whitney Stewart has been our guest. She is executive director and client portfolio manager at Sterling Capital.<\/p>\n

    —<\/p>\n

    This BNN Bloomberg summary and transcript of the Feb. 27, 2026 interview with Whitney Stewart are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.<\/i><\/p>\n<\/div>\n

    <\/a><\/strong> <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

    … leadership widens beyond mega-cap technology<\/span> names, investors may find opportunities … to generative AI and shifting tech<\/span> spending. Valuation gaps remain … compared with the mega-cap tech<\/span> names. Let\u00e2\u0080\u0099s get … and they just have less tech<\/span> exposure. There\u00e2\u0080\u0099s less risk …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-104529","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/posts\/104529","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/comments?post=104529"}],"version-history":[{"count":0,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/posts\/104529\/revisions"}],"wp:attachment":[{"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/media?parent=104529"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/categories?post=104529"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/tags?post=104529"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}