Zacks Market Edge · Zacks Investment Research

3 Top Stocks That Aren’t the Mag 7

October 2, 2025·29 min·2 clips

Why is Berkshire Hathaway, a trillion-dollar giant, underperforming the S&P 500 despite its massive cash hoard?

Host Tracy Reineck presents three large-cap investment opportunities outside the popular "Magnificent Seven" technology stocks. She targets investors seeking portfolio diversification beyond dominant AI and tech names. Reineck focuses on established, well-run companies in traditional sectors she terms "old economy." The first stock analyzed is Berkshire Hathaway (BRK.B), a trillion-dollar conglomerate facing a transition as CEO Warren Buffett steps down. Berkshire's diverse holdings include BNSF Railway, Geico, and See's Candy, but its shares have underperformed the S&P 500 with only 9% growth over the past year. The stock carries a Zacks Rank #3 (Hold) and trades at a forward P/E of 24.6, which is considered expensive for its historically slower growth profile. Earnings are expected to decline 7.7% this year, and the company's massive $350 billion cash hoard awaits deployment. The second company is Fastenal (FAST), an industrial supplier of fasteners and safety products with a $56 billion market cap. Its shares are up 37% over the past year, outperforming the market, and it holds a Zacks Rank #2 (Buy). Analysts project double-digit earnings growth of 11% this year and 10.7% next year. The third stock is Costco (COST), the retail giant with a $406 billion market cap and a Zacks Rank #3 (Hold). Costco is expected to deliver 10.5% earnings growth this fiscal year, supported by 7.8% sales growth. Its shares have gained only 4.4% over the past year and are trading in a consolidation pattern after a long rally. A surprising insight is that despite its premium valuation, Costco's price-to-sales ratio of 1.48 is significantly lower than Fastenal's ratio of 7.2. Reineck notes that even Warren Buffett is not currently buying Berkshire Hathaway shares, as he only buys when they are "cheap." Fastenal's stock performance over the last five years, up 119%, has nearly matched Microsoft's 149% gain, excluding Microsoft's recent AI surge. Over the same five-year period, Costco's 160% return actually beat Microsoft's. All three highlighted stocks have outperformed the S&P 500's 98.6% five-year return. Reineck personally finds all three stocks too expensive for her value-investing approach and is waiting for a price pullback. The episode's tone is educational and conversational, delivered as a solo commentary with clear data references. Reineck's style is analytical, walking through specific financial metrics like P/E ratios, PEG ratios, and Zacks rankings for each company. This episode is ideal for equity investors looking for non-tech large-cap ideas and those interested in fundamental analysis of industrial and consumer sectors. Listeners seeking high-growth, speculative stories or immediate stock recommendations might find the cautious, watchlist-focused approach less appealing.

As heard by us

A brisk look at large-cap names outside the MAG-7, with emphasis on valuation and quality.

This episode looks at three large-cap names outside the MAG-7, with Tracy Reineck using Zacks ranks, earnings, charts, and valuation to sort out what still looks cheap and what has already moved.

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Why you'd press play

You want three big-cap ideas outside the MAG-7 while the usual names already feel crowded.

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