• Value-investing legend Bill Nygren says the S&P 500 lacks the diversification it once had.

• He likes to invest in inexpensive firms with enough capital available to consistently buy back shares.

• Nygren mentioned Corebridge Financial as a top pick that checks all his boxes.

The S&P 500 isn’t as risk-free as investors might think, says Oakmark Funds’ Bill Nygren, who lamented the S&P 500’s growing lack of diversification.

Moderately than buy the mega-cap tech stocks that dominate major indexes, the value-investing legend told CNBC he’s in its place focused on inexpensive firms with ample money available to consistently buy back shares.

“It’s change into so essential to us that we invest with firms that are taking matters into their very own hands and using excess capital to repurchase their very own stock,” Nygren told the outlet on Monday.

One stock he pinpointed that matches the bill is Corebridge Financial.

While the stock is currently trading around $28 a share, Nygren sees it almost doubling is book value to $50 by the tip of 2025, or about 4 or five times earnings. He also predicts that Corebridge could buy back as much as 20% of its outstanding stock annually, a practice that generally engineers gains by increasing the per-unit value of each remaining share.

“It’s a fame not many individuals study,” Nygren said of the firm. “They haven’t got to depend on other investors to acknowledge the value. They simply keep reducing the flow.”

He continued: “I think it just creates a tremendous opportunity for firms that are good businesses, generating quite a few money flow, and it gives them the prospect to increase per share value by reinvesting in themselves.”

Read the unique article on Business Insider