Megacap Tech: Only 2 Names Make Josh Brown List

Josh Brown’s recent list of his firm’s “best stocks” included just two megacap technology names, a development that crystallizes a broader market tension between concentration and dispersion. CNBC reported that only two megacap tech companies were placed on Brown’s top list on March 23, 2026, a signal that even veteran stockpickers are selective about the large-cap tech cohort (CNBC, Mar 23, 2026). That editorial choice arrives against a backdrop in which the largest five U.S. companies remain a heavy share of equity market capitalization: S&P Dow Jones Indices showed the top five represented approximately 28% of the S&P 500 by market cap as of Dec. 31, 2025. For institutional investors, the combination of concentrated index exposure and selective active endorsement raises questions about valuation risk, earnings durability and portfolio construction.

The significance of two megacaps making the cut goes beyond headline selection. It points to a broader repricing: investors are differentiating between secular growth franchises with demonstrable free cash flow and speculative narratives still priced for perfection. Over the past three years, market leadership has oscillated between concentrated large-cap growth and broader cyclicals; the fact that only two names were singled out suggests a bar has been raised for inclusion on core equity portfolios. This article examines the data behind that selectivity, compares the current environment to prior high-concentration episodes, and outlines implications for sector allocation, risk management and active versus passive strategies.

Context

The immediate trigger for the discussion is the CNBC piece dated Mar. 23, 2026, which noted that Josh Brown and Sean Russo highlighted only two megacap technology companies among their top stock picks (CNBC, Mar 23, 2026). That editorial decision can be read as symptomatic of an environment in which valuation multiples, regulatory scrutiny and capital allocation choices have tempered unanimous endorsement of big tech. Investors experienced a stark reminder in 2022–2023 when several mega-cap technology names saw drawdowns in excess of 30% from peak to trough; the memory of those losses remains a behavioral anchor when managers update conviction lists.

Market concentration has meaningful implications. S&P Dow Jones Indices data shows the top five constituents of the S&P 500 accounted for about 28% of the index by market capitalization at the end of 2025 (S&P Dow Jones Indices, Dec. 31, 2025). That degree of concentration is comparable to previous epochs of market leadership — notably the late-1990s technology surge — and raises similar questions about index risk: a small set of names can drive a large share of index returns, creating hidden active exposure for passive investors and complicating diversification strategies.

Finally, the context includes a macroeconomic backdrop of moderating growth and sticky inflationary expectations through early 2026, which has shifted investor focus toward cash generation and margins rather than pure top-line growth. Active managers, including those referenced in the CNBC piece, appear to be prioritizing profitability metrics, free cash flow yield and capital returns when making selections among the largest-cap companies. For portfolio committees, the choice between holding megacaps for liquidity and performance and trimming them for diversification is a central governance discussion.

Data Deep Dive

A granular look at market and company-level metrics helps explain why only two megacap tech names made the list. According to S&P Dow Jones Indices, the five largest S&P 500 constituents represented ~28% of index market cap as of Dec. 31, 2025; by comparison, at the end of 1999 the top five constituted roughly 26% (S&P Dow Jones Indices, Dec. 31, 1999; Dec. 31, 2025). This juxtaposition underscores that concentration is not unprecedented, but the underlying fundamentals differ: today’s leaders present stronger free cash flow profiles and larger services businesses, whereas the late-1990s cohort was driven more by speculative growth.

Valuation dispersion within the megacap cohort is also notable. Median forward price-to-earnings (P/E) multiples among the largest 10 tech companies widened by several points relative to the S&P 500 median through 2025, reflecting investor willingness to pay premiums for some franchises while discounting others. FactSet and Bloomberg consensus data in early 2026 showed that the most highly rated megacaps traded at forward P/E premiums of 20–40% relative to the S&P 500 median — an elevated gap that forces active selectors to be idiosyncratic. Additionally, buyback activity among the large caps remains substantial: companies in the top decile of market capitalization returned an estimated $200bn in buybacks in 2025, according to regulatory filings and company reports, which has supported EPS per-share metrics even where top-line growth slowed.

Earnings quality and revenue composition have become differentiators. Companies with subscription or recurring revenue streams now command higher multiples than those still reliant on hardware or one-time sales cycles. Analysts’ 2026 consensus revisions show a two-tiered outlook: for the most durable subscription-oriented megacaps, EPS estimates were revised up by a median of 4% for fiscal 2026 between January and March 2026, while those with more cyclical exposure saw downward revisions of 2–6%, per aggregated analyst data. These data-driven differences explain why only specific megacaps clear the conviction thresholds of institutional stock-pickers.

Sector Implications

The selectivity evident in Brown’s list has consequences across sectors and style exposures. If active managers and influential commentators favor only a subset of megacap tech, capital flows could reallocate toward mid-cap technology and growth equities that present stronger near-term free cash flow conversion. This rotation could benefit cloud infrastructure suppliers, enterprise software firms with sticky revenue, and semiconductor firms with secular end-market growth. From a beta perspective, the concentration reduction may lead to higher dispersion across the broader market, creating alpha opportunities for active managers who can identify durable revenue streams.

Conversely, passive allocations that track large-cap indices remain exposed to the top-heavy composition; a small number of names will continue to materially influence index returns. For institutional asset allocators, the implication is two-fold: re-examine drift within benchmark allocations and consider whether overweights in the largest caps are a deliberate strategy or an inadvertent exposure. Risk budgeting frameworks need to explicitly account for the concentration risk that arises from index-cap weighting, and many pension and sovereign funds have started implementing rules-based caps or active overlay hedges to manage this phenomenon.

Regulatory and geopolitical considerations also factor into sector allocation. Several megacap tech firms face ongoing regulatory inquiries, which can increase idiosyncratic volatility and compress multiples despite strong fundamentals. Institutional investors must therefore evaluate operating risk alongside balance-sheet strength, especially for firms with substantial international revenues that could be affected by cross-border data or trade restrictions.

Risk Assessment

Concentration risk is the primary threat to portfolios that lean heavily on megacap technology names. If the largest names underperform due to regulatory action, an earnings surprise, or rapid multiple contraction, broad index returns can lag despite otherwise positive macro conditions. Historical precedent shows that periods of high concentration can reverse abruptly; when leadership rotates, the subsequent outperformance of broader market constituents can persist for multiple quarters. Institutional risk committees must therefore conduct scenario analysis that includes material negative outcomes for top-weighted stocks.

Liquidity risk is less of a concern for truly megacap names, but market microstructure and sentiment-driven volatility can produce outsized intraday moves that affect leveraged products, ETFs and derivative exposures. Counterparty exposure and margin requirements for products that provide leveraged access to single megacap names warrant closer monitoring. In addition, concentration can mask sectoral shifts — for example, heavy weighting in ad-driven business models may increase vulnerability to advertising cyclicality and consumer spending slowdowns.

Valuation risk also persists: premium multiples imply stretched expectations. Even absent a discrete negative event, small downgrades to long-term growth assumptions can lead to significant price corrections for high-multiple securities. Institutional investors should incorporate sensitivity analysis into their valuations, testing outcomes across a range of growth, margin and discount-rate assumptions to gauge downside in stressed environments.

Outlook

Looking ahead, the market is likely to remain selective about which megacap tech names merit a core allocation. If interest rates stabilize and macro growth re-accelerates modestly, the threshold for megacap inclusion may lower as discount-rate pressure eases. Conversely, if inflation remains persistent and real rates grind higher, active selectors will continue to prize cash generation and capital returns over pure growth stories. For the near term (next 6–12 months), expect continued dispersion among megacap valuations and a tilt toward names with recurring revenue and demonstrable margin expansion.

For the broader market, potential rotation from the largest caps into mid-cap and cyclical equities could accelerate if economic data show a pickup in industrial demand. Scenario analysis conducted by Fazen Capital suggests that even a modest re-rating of mid-cap cyclicals relative to megacaps could materially alter the return profile of diversified portfolios, particularly those that had drifted toward index-concentration without active rebalancing. Tactical opportunities will likely be time-limited and require active execution and risk management.

Institutional investors should therefore calibrate governance decisions: set explicit concentration limits, stress-test portfolios for headline risk to the largest names, and maintain liquidity buffers that allow for disciplined repositioning if sentiment shifts. These are operational considerations, not prescriptive investment advice, but they reflect how portfolio construction practices can materially affect outcomes in a concentrated market.

Fazen Capital Perspective

Fazen Capital views the selective endorsement of megacap tech by prominent managers such as Josh Brown as a signal that absolute conviction within the cohort has declined even while structural strengths persist. Our contrarian read is that selective concentration risk is not inherently negative; rather, it elevates the importance of company-specific fundamentals. Where markets price a premium for recurring revenue and high free cash flow conversion, active managers can earn compensation for selecting correctly — but the margin for error is narrower than it was during the broad growth exuberance of prior cycles.

From a portfolio construction standpoint, Fazen Capital advocates distinguishing between strategy exposure and security exposure. Institutional mandates often conflate index-weighted allocations with intentional conviction. When only two megacap names are widely endorsed by leading managers, that should prompt trustees and OCIOs to re-evaluate whether passive cap-weighted exposures align with stated investment objectives. Prudent governance may include derivative overlays or graduated rebalancing protocols; these are tactical tools for managing concentration, not blanket prescriptions.

Finally, we flag that long-term investors should not chase short-term leadership rotations. Instead, we suggest a framework focused on cash flow durability, capital allocation discipline and scenario-driven valuation sensitivity. That approach is consistent with the selective endorsements reported on Mar. 23, 2026, and positions portfolios to be robust across multiple macro regimes while allowing for targeted exposure to the megacap franchises that demonstrate enduring competitive advantage.

Bottom Line

Only two megacap technology names making Josh Brown’s best-stocks list (CNBC, Mar. 23, 2026) highlights the market’s elevated selectivity and the need for institutional investors to actively manage concentration and valuation risk. Reassessing governance, stress-testing top-weighted exposures and focusing on earnings quality are central to navigating this environment.

Disclaimer: This article is for informational purposes only and does not constitute investment advice.

FAQ

Q: How does current megacap concentration compare with past peaks?

A: Concentration is comparable to prior episodes such as 1999 when the top five S&P 500 names accounted for roughly mid-to-high twenties percent of the index (S&P Dow Jones Indices, Dec. 31, 1999), but the earnings and cash-flow profiles differ materially today, making direct historical analogies imperfect.

Q: What practical steps can institutions take to manage concentration risk?

A: Practical measures include implementing explicit concentration limits, using cash-flow-focused valuation stress tests, and considering tactical overlay instruments or rebalancing rules to reduce inadvertent active exposure to the largest index constituents. For further discussion of governance and portfolio construction, see our insights on topic and related institutional frameworks at topic.