Rotate Into These Two Stocks After Small's Pullback Warning

The S&P 500 sits near all-time highs. The lift comes from a narrow group of stocks. Allan Small, senior investment advisor at Allan Small Financial Group, told BNN Bloomberg on June 25 that the market has risen "like a rocket ship" rather than climbing the traditional escalator. He warned that not all tech names are performing equally; some Mag 7 stocks have recently sold off. That creates an opening for investors to trim winners and rotate into high-quality names that have lagged.

Small said a 5% to 10% pullback is normal a couple of times a year. He expects it could come in late summer or early fall. His advice: diversify across banks, pharma, and retail. The risk embedded in the current setup is a narrow market that leaves the broader index vulnerable to sector rotation or multiple compression. The better move is to identify stocks with growing earnings and revenue that trade at reasonable valuations, not at extremes.

Hedge fund 13F filings show concentrated buying in a handful of large caps. Among them are Medtronic (MDT) and Lowe's (LOW), both with recent catalysts that strengthen their long-term earning power.

Medtronic received FDA 510(k) clearance on June 8 for its Nellcor pulse oximetry system with the Nell-EQ intelligent processor. The system is designed to provide consistent readings across skin tones and clinical environments, addressing a known performance bias in older sensors. The clearance follows positive verification study results and the device's previous designation under the FDA's Safer Technologies Program. Medtronic plans to launch globally in the coming months. The clearance triggers a revenue cycle in monitoring hardware and consumables, a predictable recurring stream.

Lowe's introduced Material Lists on May 21, an AI tool that converts handwritten notes and photos into quote-ready orders. For Pro customers, this cuts administrative time and tightens the purchase-to-project cycle. The tool is part of a suite of digital resources on Lowes.com, including Blueprint Takeoffs and Pro Extended Aisle. Lowe's continues to invest in technology to help Pro customers improve efficiency. That strengthens Lowe's moat against Amazon Business by offering a workflow that smaller competitors cannot replicate.

Other names on hedge fund lists include Microsoft (MSFT), Amazon (AMZN), and Berkshire Hathaway (BRK.B). Microsoft trades at $372.97, up 5.71% today, with an AlphaScala score of 51/100 (Mixed). Amazon at $232.69, up 2.50%, scores 45/100 (Mixed). Berkshire scores 51/100 (Mixed). Each has specific drivers: Microsoft's Azure and AI capital expenditure cycle, Amazon's AWS and retail margin improvements, Berkshire's float and buyback strategy. The scores reflect mixed setups that need earnings confirmation at current multiples.

Small said he looks for companies with growing earnings and top-line numbers that trade cheaply. Medtronic and Lowe's fit that description. The FDA clearance and the AI tool are concrete steps that widen each company's competitive advantage.