Image Source: UnsplashThe great Peter Lynch once said, “The real key to making money in stocks is not to get scared out of them.” Hedge fund traders can be frightening as they move rapidly and often in tandem, but, most importantly, they are fickle. The sell-off in software stocks is the most recent example. But I have been saying for years that these companies are the new defensives, observes Nancy Tengler, CIO at Laffer Tengler Investments.Goldman Sachs reported that institutional investors sold technology stocks at the highest level over the last 11 weeks. Some 60% of that selling was in software stocks.My experience has shown, and the hedge funds’ collective performance has confirmed, that it often makes sense to take advantage of the volatility they create. Look no further than Nvidia Corp.’s (NVDA) stock powering ever higher after the recent earnings report. Why? Because the hedge funds are piling in. Chips, chips, chips, and more chips.Salesforce Inc. (CRM) recently spooked the market with weak guidance. I think that is more about Salesforce’s model and limited use cases for AI in their software offering than a verdict on all software companies – particularly the cloud hyperscale’s. Cloud computing accelerated last quarter at Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), and Alphabet Inc. (GOOGL).They continue to turn in double digit earnings growth, they out-earn the SPX, dividends and dividend growth are increasingly in the mix, and they are actually benefiting from higher interest rates.Finally, I want to share a few words about S&P 500 concentration. We hear it repeated almost daily that the market is being driven and dominated by the ‘Magnificent Seven,’ the ‘Fab Five,’ or simply Nvidia. But it is important to note that the SPX is the least concentrated index of the major developed global indices. See the chart above from our friends at Strategas.

About the Author
Nancy Tengler is the chief executive officer and chief investment officer of Laffer Tengler Investments. She is responsible for active equity management research and portfolio management as well as leading the firm. Ms. Tengler is a committed advocate of financial literacy for women as the leader of Laffer Tengler’s Women & Wealth initiative, which encourages and informs women on how to take charge of their own financial and investment planning.The second edition of her book, “The Women’s Guide to Successful Investing,” was published in September 2023. As one of the most dynamic women in the investment management industry today, she is a sought-after TV and print financial commentator on local and national media outlets. Prior to joining Laffer Tengler, Ms. Tengler had a distinguished investment management career in several senior leadership roles.Most recently, she served as chief investment officer at Heartland Financial where she was also a director of Arizona Bank & Trust. Ms. Tengler has also served as president, chief executive officer, and chief investment officer of Fremont Investment Advisors in San Francisco. Prior to that, she founded Global Alliance Value Investors.She also worked for UBS Asset Management as head of the Value Equities Group and with Spare, Tengler, Kaplan, and Bischel, Ltd. as president and senior portfolio manager. More By This Author:Gold And Silver: Updated Targets And Forecasts For The Next Phase Of The RallyD: Should You Buy The Utility As An AI Power Play?TLT: Job Market, Momentum Shifts Point To Better Days Ahead