Over the past couple of years, investors have been hearing more about concentration risk. That’s the result of a smaller number of stocks — namely a handful of communication services and technology names — taking on outsized weights in supposedly broad market indexes.

To be sure, this year’s market decline means that the likes of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), and Meta Platforms (NASDAQ:FB) now account for lower though still large percentages of broader market benchmarks.

On the other hand, some of those names are now discounted relative to their recent histories, indicating that there are deals to be had with exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Both funds track the Nasdaq-100 Index (NDX).

“After starting the year in overvalued territory, we think the market has swung too far to the downside. According to a composite of the stocks covered by our equity research team, the broad U.S. equity market is trading at a 15% discount to our fair value,” wrote Morningstar analyst Dave Sekera. “The most recent instances in which markets traded near this discount level were in December 2018, when the market suffered from a growth scare, and in March 2020, when the markets were reeling from the emergence of the coronavirus.”

The research firm points out that Google parent Alphabet, Amazon, Facebook parent Meta, and Microsoft are now undervalued. That quartet combines for approximately 28% of the weights of both QQQ and QQQM.

Following a more than decade-long run (largely led by mega-cap names) in which growth stocks trounced value, it may seem far-fetched that some marquee members of the Nasdaq-100 are now undervalued. Yet, that is the case today, and that could enhance the allure of QQQ and QQQM because some of the companies highlighted here rarely offer discounts to investors.

“For the year to date, each stock’s price has dropped more than the broad market average, yet we remain convinced of the intrinsic value of these companies for long-term investors,” added Sekera. “Based on our research and valuation methodology, we think the market is providing long-term investors the opportunity to invest in these high-quality, wide-moat growth stocks at valuations that are closer to value stocks and provide a significant margin of safety from their intrinsic value.”

The technology and communication services sectors, which account for over two-thirds of QQQ and QQQM, are undervalued, but those discounts aren’t as appealing when removing the stocks mentioned here, underscoring the allure of the Invesco ETFs.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.