The S&P 500’s remarkable performance in recent years has been heavily driven by a handful of dominant technology companies, particularly the “Magnificent Seven” – Apple, Microsoft, Alphabet, Amazon, NVIDIA, Meta, and Tesla. While these tech giants have certainly delivered impressive returns, their outsized influence has overshadowed the broader market composition and potentially created a blind spot for investors.
It’s crucial to remember that the S&P 500 encompasses nearly 500 other companies across diverse sectors, many of which operate successful businesses but receive far less attention from the media and investors. This presents an opportunity for disciplined investors willing to look beyond the headlines and conduct thorough fundamental analysis.
Using a sophisticated screening methodology that synthesizes 22 distinct investment approaches, Validea has identified ten companies within the S&P 500 that exhibit compelling fundamental characteristics. These screening criteria are derived from the proven strategies of legendary investors and supported by rigorous academic research. The methodology incorporates principles from Warren Buffett’s focus on sustainable competitive advantages and strong returns on capital, Peter Lynch’s emphasis on reasonable valuations relative to growth rates, and Benjamin Graham’s insistence on margin of safety.
While these companies may not generate the same level of excitement as their larger tech counterparts, they demonstrate strong fundamentals across key metrics such as consistent cash flows, healthy balance sheets, sustainable competitive positions, and attractive valuations relative to their intrinsic value. This combination of qualities suggests these businesses may be well-positioned to deliver solid long-term returns, even if they don’t capture daily headlines.
Here are the top 10 most fundamentally sound stocks within the index using our guru models as of February 2025.
| Ticker | Company Name | Price | Market Cap ($mil) | PE Ratio | Price/ Sales | Relative Strength | Price/ Book | Price/ Cash Flow | Dividend Yield | Long-Term EPS Growth |
|---|---|---|---|---|---|---|---|---|---|---|
| PHM | PULTEGROUP INC | $107.33 | $21,730 | 7.3 | 1.2 | 57 | 1.8 | 6.9 | 1.0% | 26.2% |
| RJF | RAYMOND JAMES FINANCIAL INC | $162.95 | $33,390 | 15.9 | 2.2 | 81 | 0.9 | 14.4 | 1.1% | 20.1% |
| XOM | EXXON MOBIL CORP | $111.67 | $486,100 | 14.2 | 1.4 | 62 | 1.8 | 8.3 | 3.4% | 15.5% |
| JPM | JPMORGAN CHASE & CO | $274.99 | $774,190 | 13.9 | 4.4 | 86 | 2.4 | 15.7 | 1.7% | 13.5% |
| NVR | NVR INC | $7,494.36 | $22,570 | 14.8 | 2.1 | 51 | 5.4 | 18.2 | 0.0% | 18.6% |
| WFC | WELLS FARGO & CO | $79.64 | $261,932 | 14.8 | 3.2 | 88 | 1.6 | 13.5 | 1.9% | 33.4% |
| CMCSA | COMCAST CORP | $35.23 | $133,205 | 8.5 | 1.1 | 40 | 1.6 | 4.3 | 3.5% | 11.9% |
| VZ | VERIZON COMMUNICATIONS INC | $40.49 | $170,463 | 9.8 | 1.3 | 56 | 1.7 | 4.9 | 6.6% | -2.3% |
| WRB | W R BERKLEY CORP | $61.20 | $23,260 | 14.0 | 1.7 | 68 | 2.2 | 19.6 | 0.4% | 26.9% |
| DHI | DR HORTON INC | $130.60 | $41,155 | 9.2 | 1.1 | 44 | 1.7 | 8.6 | 1.0% | 17.6% |
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