By Jacob Sonenshine

Technology stocks have been all over the place. Those looking to veer away from the uncertainty can find alternatives just by looking around their neighborhoods, which might lead them to a Dollar General or CVS Health.

The VanEck Semiconductor ETF, which owns Nvidia and a host of other chip makers that are seeing explosive growth from Big Tech services companies' investments in artificial intelligence data centers, dropped more than 9% Friday. It then popped 5% Monday, only to give that gain back Tuesday. The issue is that it has soared this year, causing investors to take profits last week, by selling.

Even software, which took a beating early this year on fears that AI will displace many of their offerings, has whipsawed. The iShares Expanded Tech-Software Sector ETF bounced 44% from its low this year to the start of this month, stopped short of its record high, and has since tumbled 15%.

True, tech stocks have plenty of potential, especially chip makers, as companies make clear that data center investments and chip demand will grow explosively for some time. But why accept all of the risk these stocks carry? There are cheaper, non-tech names that look promising.

So Trivariate Research's Adam Parker screened for stocks in the top 900 U.S. companies by market capitalization that have relatively low correlations to AI chip makers, meaning if the chip names drop, these may not necessarily fall. Within those, he looked for the ones that are trading at less than 17 times expected next 12 months earnings (comfortably below the S&P 500's just over 20 times), and that trade below their long-term medians. Stocks on the list also had to have gathered momentum recently, showing that the market sees potential for improved business -- yet these shares are still cheap enough that such improvements could drive more gains.

Companies on the screen had to have recent gross profit margins below their long-term averages, but have analysts calling for rising gross profit margins. That's key; it means these companies, theoretically, are under-earning relative to their potential -- and appear positioned to deliver enough pricing power to offset any rising product costs. That's often a sign of strong demand and competitiveness versus peers.

The screened turned up a few household names: CVS Health, Pfizer, Verizon Communications, and Best Buy.

Other healthcare names on the list: drugmaker Biogen, Align Technology (the company behind Invisalign), and Baxter International, which makes hospital products, among other healthcare goods.

One of the best examples is Dollar General. That company, with shares up almost 7% from a multi-month low hit in May, has the potential to make improvements -- and spark even larger gains -- especially since it trades at about 14 times earnings, versus the just over 20 times it has often touched in the past decade.

So what might change for Dollar General? Analysts expect its gross margin to rise about 40 basis points to 31% this year, as the company looks to reclaim a 10-year average of about 30.8%, according to our calculations of FactSet data.

Management is implementing mild price increases, but is still restoring the chain's status as a value destination in the face of inflation in many other areas in the consumer sector. Meanwhile, any ebbing of energy and related costs if the Iran war ends would provide an additional boost to margins.

Margin improvement can help push earnings and the stock higher. The same goes for the rest of this basket of stocks.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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June 09, 2026 14:07 ET (18:07 GMT)

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