Beat the Market Bubble: Top Dividend & Value Picks from Motley Fool CEO
Summary:
The S&P 500 has hit a record high, but valuations are lofty and investors should consider taking a different approach to investing. The Motley Fool’s CEO, Tom Gardner, suggests looking "where people aren’t looking" for stocks that will beat the market in the long term.
The Market is at Historic Levels
The S&P 500 has staged one of its most dramatic V-shaped recoveries since and just hit a record high after briefly slipping into correction territory in April. Investors are wondering whether the stock market is overheated and whether they should invest in stocks now or remain on the sidelines. The fear is warranted, as the S&P 500 is currently trading at over 25 times earnings, and U.S. stocks now account for 65% of all stocks worldwide. Those are historically high valuations.
Investors have witnessed historic volatility in 2025 so far. After peaking in February, the S&P 500 briefly slipped into correction territory in April, leaving many fearing a market crash. However, the S&P 500 has instead staged one of its most dramatic V-shaped recoveries since and just hit a record high. The wild ride has left investors wondering whether the stock market is overheated and whether they should invest in stocks now or remain on the sidelines.
The Type of Stocks Investors Should Buy Now
In a recent interview, Gardner shared his perspective on the current state of the market and how investors should approach investing. While recognizing that the markets are at high valuations, Gardner maintains that there are still hundreds of good stocks you could buy now, but they’re probably "not the most well-known, actively followed, most richly valued" stocks. Gardner believes it’s time to be "a little more defensive" right now and look for investments "where others aren’t looking."
Gardner suggests that investors should focus on dividend payers, value-oriented investing, and defensive stocks. Good dividend stocks can generate a steady stream of passive income even during turbulent times, while defensive stocks are typically recession-proof and a great way to reduce portfolio risk. Value stocks, meanwhile, trade for a price lower than what their fundamentals merit.
Dividend Stocks
Dividend stocks can provide a stable source of income for investors, making them an attractive option in uncertain times. Enterprise Products Partners (EPD) is one such stock that fits the bill. It is one of the largest midstream energy companies in the U.S., owning over 50,000 miles of pipeline.
It stores, processes, and transports natural gas liquids and other products under long-term contracts in return for a fee. The business is recession-proof and largely immune to the volatility in oil and gas prices. Moreover, 90% of the contracts have escalation clauses to offset the effects of inflation.
Defensive Stocks
Brookfield Infrastructure’s (BIPC) (BIP) business is also recession-resilient, as it earns from defensive assets, such as utilities, rail and toll roads, midstream energy, and data centers. Nearly 85% of Brookfield’s funds from operations (FFO) are contracted or regulated and indexed to inflation.
Value Stocks
Nucor (NUE) is a cyclical stock that has generated impressive total returns in recent years despite being exposed to commodity prices. The company uses electric arc furnaces in steel mills, which are more flexible, efficient, and cost-effective compared to traditional blast furnaces.
Conclusion
The S&P 500 has hit a record high, but valuations are lofty and investors should consider taking a different approach to investing. The Motley Fool’s CEO, Tom Gardner, suggests looking "where people aren’t looking" for stocks that will beat the market in the long term. By focusing on dividend payers, value-oriented investing, and defensive stocks, investors can reduce their risk and increase their chances of beating the market in the long run.
The three stocks mentioned – Enterprise Products Partners (EPD), Brookfield Infrastructure’s (BIPC) (BIP), and Nucor (NUE) – are all attractive options for investors looking to invest in dividend payers, defensive stocks, or value stocks. They have a proven track record of delivering steady cash flows and growing dividends, making them ideal investments for those seeking stability and long-term growth.
Investors should be aware that the market is at historic levels, but this doesn’t necessarily mean it’s time to sell. By doing their research and choosing the right stocks, investors can still beat the market in the long term.
Moreover, investing in dividend payers, value-oriented investing, and defensive stocks can provide a stable source of income for investors, making them an attractive option in uncertain times.
