State Street Technology Select Sector SPDR ETF

XLK

Market cap $87.5B

Market sentiment appears overly defensive in certain areas, suggesting potential mispricing in risk assets. The analysis highlights top-tier BDCs, focusing on dividend yields, price/NAV, leverage, and credit quality. Main Street Capital (MAIN), Capital Southwest (CSWC), and Ares Capital (ARCC) offer strong yields with varying risk profiles.

REITs are poised for potential outperformance in 2026, driven by anticipated lower interest rates and investor rotation from growth to value. Getty Realty (GTY) and VICI Properties (VICI) offer attractive valuations, strong fundamentals, and yields near 6%, supporting double-digit total return potential. GTY trades at a forward P/AFFO of 12.77x with 99.7% occupancy, while VICI has diversified assets and achieved 5.1% AFFO growth in 2025.

Sector investing — it's a typical strategy for advisors if their clients are looking beyond broad market exposure by targeting a specific sector. The concept is fairly straightforward, but implementing the strategy is not as simple as it sounds.

Netflix is oversold after a 30% decline, presenting a long-term buying opportunity despite Warner Bros. acquisition uncertainty. NFLX maintains robust fundamentals: 325M subscribers, double-digit growth, 29.5% margins, and a strong $9B liquidity position versus $13.5B debt. Build-A-Bear Workshop offers upside with record sales, double-digit EPS growth, aggressive store expansion, and a debt-free balance sheet supporting dividends and buybacks.

The AI revolution has arrived, and if you're overwhelmed by the past couple years' of momentum or the more recent wave of volatility, it may be best to just go with a tech ETF, especially if you're not interested in chasing winners or buying into dips that might extend deeper than one would think.

If you want to own a piece of the tech sector without picking individual winners, The Technology Select Sector SPDR Fund (NYSEARCA:XLK) offers a straightforward solution.

Shares sold short in XLK have jumped from roughly 6.5 million in November to over 18 million by late January, nearly tripling in just two months, according to Benzinga Pro data.

Dividend stocks and defensive sectors have dramatically outperformed as investors flee AI-vulnerable and AI-spending industries, but valuations now appear stretched. Consumer staples and energy sectors trade at historically high forward P/E multiples, often exceeding the S&P 500, despite lower long-term earnings growth prospects. Materials and industrials have also become extended, with valuations reflecting significant future earnings already priced in, especially given AI infrastructure spending.

In a market environment fraught with uncertainty, concentration risk should be mitigated when looking for sector-specific exposure.

Energy, basic materials, and defensive consumer stocks are in. Tech and financials are out.