By Jacob Sonenshine

Most stocks have rallied too much to look like buys. A few haven't -- so they could gain from here.

The S&P 500 has set several records this year and is now trading near a valuation it hasn't touched in more than six decades. The rally is perched on three pillars -- falling inflation, lower interest rates, and rapid growth of spending on artificial intelligence -- and the collapse of any one could bring down the market.

The upshot: Now just isn't a great time to buy exposure to the entire market.

That's why Citi strategists compiled a dozen names that are positioned to see more buyers come in to bid them higher.

They started their process by excluding stocks with lower liquidity, or low trading volumes. Then, they tagged those that placed high in the bank's quantitative model -- stocks with the best combination of upward earnings forecast revisions from analysts, high-quality financial metrics, strong price momentum, and low "crowding." Crowding simply means portfolio managers haven't poured a lot of money into these names.

We're focusing on the ones with the four lowest crowding scores because they have a solid chance at moving into favor with investors with their strong fundamentals. This way, we're avoiding many stocks that have already been snapped up.

Three are industrial conglomerate Danaher, infrastructure services company Quanta Services, and Kinetik Holdings, an energy service company. They all have crowding scores of 72% or lower; the most crowded stocks are above 90%.

The least crowded on the list, with a score of 22%, is Evergy, an $18 billion utility company that serves millions of customers in Kansas and Missouri.

Evergy's fundamentals look the way any stable utility provider's should. Utilities, in aggregate, are growing their "rate bases," or their base of power plants, as they expand their clean-energy capabilities while slowly retiring old plants. They have periodic agreements with the states they operate in to earn a certain return on the equity of those assets, which means they're allowed to lift their servicing rates for customers.

That's been the case for Evergy, which increased its servicing rates last week with Kansas, the state that represents the majority of the company's revenue. Consequently, analysts expect Evergy's return on equity -- its net income as a percentage of total net assets -- to rise almost a percentage point to 9.4% this year, according to FactSet.

As the rate base rises over the coming years, which analysts expect, total net assets would rise. As long as Kansas and Missouri allow a stable return on net assets, the company's earnings can grow.

Right now, analysts expect an 8.4% annual increase in net assets from the year's end through 2027. But since they expect a mild bump in returns on those assets, they forecast almost 9% annual earnings growth in that time.

That could bring the stock higher, especially if the market is indeed underappreciating the likelihood of this outlook. Shares trade at 18.2 times expected earnings for the coming 12 months, below the almost 19 times for the Utilities Select Sector SPDR Fund, leaving plenty of room for gains if the market can become more confident in the growth outlook.

Add in a 3.5% dividend yield for expected payments in the coming 12 months -- payments that should grow -- and the stock could post a double-digit total return annually.

That may not sound like an exciting return even if decent, but the stock has been far less volatile -- and therefore safer -- than the rest of the market in the past three years, according to FactSet.

So, yes, this a good deal -- given today's risks to the entire market.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

October 06, 2025 14:45 ET (18:45 GMT)

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