40 forgotten stocks investors may be overlooking, top ETFs to play the AI trade

Key Concepts

• JOLTS Data: Job Openings and Labor Turnover Survey – a monthly indicator of job openings, hires, and separations.
• ADP Report: Automatic Data Processing – a monthly report estimating US private sector employment changes.
• CES (Consumer Electronics Show): Annual technology trade show showcasing new innovations.
• XLV: ETF representing the healthcare sector.
• Nvidia: Leading semiconductor company specializing in GPUs and AI technology.
• K-shaped Economy: A scenario where economic recovery is uneven, benefiting some sectors and demographics while leaving others behind.
• Capex: Capital Expenditure – funds used by a company to acquire, upgrade, and maintain physical assets.
• Tariffs: Taxes imposed on imported goods.
• AI (Artificial Intelligence): The simulation of human intelligence processes by computer systems.
• BAI: BlackRock AI ETF – an exchange-traded fund focused on companies involved in artificial intelligence.
• DYF: iShares Factor Rotation ETF – an ETF that dynamically adjusts its sector allocations based on macroeconomic conditions.
• BANK: iShares BlackRock Income ETF – an ETF focused on generating income from various fixed-income sectors.
• LIBOR (London Interbank Offered Rate): A benchmark interest rate. (Mentioned in passing regarding historical context)

Market Catalyst – January 4, 2026 Summary

Introduction

This broadcast of Market Catalyst, hosted by Julie Hyman, covers market movements on January 4th, 2026, focusing on three key catalysts: JOLTS data, a list of “forgotten stocks” identified by Warrior Research, and an ETF report centered on artificial intelligence. The program also features interviews with Chris Wattling of Long View Economics and Jonathan Boyer of Warrior Research.

1. Market Overview & Economic Data (JOLTS & ADP)

The US market showed a mixed performance with the Dow little changed, the S&P 500 slightly up, and the Nasdaq also marginally higher. Healthcare was the leading performing sector in the S&P 500, driven by a rally in drug makers (XLV up 1.5%). Big tech, particularly Nvidia (up 1.3%), showed continued strength, but momentum was not uniform across the sector.

The November JOLTS data revealed 7.14 million job openings, below the estimated 7.64 million. The quits rate increased to 2%, with 3.16 million quitters, exceeding estimates. This data suggests potential weakness in the labor market, contrasting with the more positive ADP report indicating a gain of 41,000 private sector jobs in December, erasing November’s losses. The JOLTS data is considered a lagging indicator.

2. Labor Market Analysis with Chris Wattling

Interview with Chris Wattling (Long View Economics) highlighted a softening labor market trend over the past 6 months. While the ADP report showed gains, a six-month moving average of private employment growth is around 20,000 per month. Wattling emphasized a “K-shaped economy” where the bottom half of the US economy is struggling. He noted the importance of housing and lower bond yields for stimulating the bottom half of the economy.

Wattling believes inflation will surprise to the downside in 2026, potentially leading to more rate cuts and lower bond yields, creating a scenario where both capital expenditure (capex) and consumer spending could improve. He attributes current economic strength to AI-related capex and data centers, while the “old economy” (housing, industrials) faces challenges. He pointed to tariffs and fiscal stimulus as factors keeping bond yields elevated in 2024. He specifically noted that durable goods inflation added 60-70 basis points to CPI over the last year, but expects this to roll over due to China’s economic struggles and deflationary pressures. He also highlighted easing rental inflation and falling oil prices as contributing factors to lower inflation.

Key Quote (Chris Wattling): “I think the picture is pretty clear. The labor market has been softening over the course of the last sort of four, five, six months.”

3. “Forgotten 40” Stocks with Jonathan Boyer

Jonathan Boyer (Warrior Research) discussed their annual list of 40 undervalued stocks poised for outperformance. These stocks are identified based on catalysts expected to drive gains within the year, rather than a traditional long-term value approach.

• Atlanta Braves Holdings: Boyer believes a tax law change in 2027, disallowing deductions for top employee salaries, could incentivize John Malone (controlling shareholder) to sell the team.
• Markel Group: Described as a “baby Berkshire Hathaway,” Markel is benefiting from activist investor Janna Partners pushing for improved capital allocation.
• Cooper Companies: Boyer suggests splitting the company into its contact lens and women’s health divisions to unlock value.
• Uber: Despite recent declines due to concerns about robo-taxis, Boyer remains bullish, citing share buybacks, rapid growth, and its position as a beneficiary of autonomous driving technology.

Boyer emphasized that these stocks aren’t necessarily the cheapest, but are expected to outperform due to specific catalysts. He noted that the “Forgotten 40” outperformed most value indexes in the previous year, despite the S&P 500’s stronger performance. He positioned the list as a diversification strategy against the technology-heavy S&P 500.

Key Quote (Jonathan Boyer): “They’re not our cheapest names, but our names that we think will outperform.”

4. Analyst Calls & Trending Tickers

• Taiwan Semiconductor (TSM): Analysts raised price targets despite the stock’s strong recent performance, citing continued AI demand and improving profitability.
• Deckers Outdoor (DECK): Downgraded by Piper Sandler due to concerns about promotions and channel conflicts.
• Wayfair (WY): Upgraded by Barclays due to improvements in its digital platform, growth initiatives, and exposure to consumers benefiting from tax refunds.
• Mobileye: Announced a $900 million acquisition of Menty, a humanoid robot maker. The stock is down 35% over the last year.
• First Solar (FSLR): Downgraded by Jefferies due to concerns about valuation and bookings visibility. The stock fell 9% on the news.
• Strategy: Gained momentum after MSCI paused plans to exclude digital asset treasury companies from its indexes.

5. ETF Report with Christy Aulian

Christy Aulian (BlackRock) discussed the outlook for ETFs, emphasizing a constructive view on the economy driven by fiscal factors and expected rate cuts. She highlighted the continued importance of AI but noted a broadening of earnings growth beyond technology.

• BAI (BlackRock AI ETF): Remains a key recommendation for accessing the AI theme.
• DYF (iShares Factor Rotation ETF): Offers diversification by dynamically adjusting sector allocations based on macroeconomic conditions.
• BANK (iShares BlackRock Income ETF): Provides income exposure to less-owned fixed-income sectors.

Aulian noted a shift in investor sentiment, with more focus on diversifying within the AI trade rather than abandoning it altogether. She also highlighted the potential of emerging market equities, particularly in Asia, as a complementary way to access the AI theme.

Key Quote (Christy Aulian): “AI is the best game in town, but it's no longer the only game in town.”

Conclusion

The broadcast presented a cautiously optimistic outlook for 2026, with AI remaining a dominant theme but diversification becoming increasingly important. The JOLTS data and ADP report provided mixed signals on the labor market, while insights from Chris Wattling and Jonathan Boyer offered nuanced perspectives on economic trends and investment opportunities. The ETF report highlighted strategies for navigating the market through targeted and diversified investments.