The pack might be focusing on risk-on/risk-off trading, but savvy investors should instead be looking to the US tech, financial and healthcare sectors, according to Legg Mason Capital Management’s chief investment officer Sam Peters.

As Peters points out, equity-risk premiums are currently at 60-year highs and in his view investors opting for high-beta strategies could be missing out on long-term valuation opportunities in the US tech, financial and healthcare sectors in particular.

While many investors are playing the short-term game of risk-on, risk-off, Peters views this as an overcrowded play and instead his firm is looking at sectors now offering the widest dispersions in the market.

“The technology and healthcare sectors have seen growth expectations collapse and the finance sector is battling regulatory concern, but in all cases they are at 60-year lows, and this is where our biggest overweights are,” said Peters.

Looking at the technology sector, Peters’ team still sees upside potential in Apple - at ten times forward earnings - but they also see value in cheap cash-rich companies like Microsoft. “Apple is an interesting case, but Microsoft is a classic example of a cheap, cash-rich company which is allocating capital much better than it has done in the past and you are beginning to see the stock re-rate and valuations come up around that,” Peters explained.

Turning to financials, Peters believes that the fundamentals for many of the larger banks will continue to improve despite pressure on net interest margins. His team sees cost savings emerging which will “more than offset compression in the net interest margin.” Along with some modest credit improvement, Peters also points to the bigger factor of loan growth starting to come through again.

In fact, the firm advocates US stocks in general, believing that they remain attractive even if investors have been put off by under-performance among large-cap names.

“Investors continue to sell US equities relative to other asset classes and we see this as an opportunity,” said Mary Chris Gay, manager of the UK-domiciled Legg Mason US Equity Fund. “While investors and institutions have been selling, there has been a significant increase in buybacks and better capital allocation among companies that are still very much flush with cash. Whether through activist investors encouraging better capital allocation or the companies improving themselves, we are encouraged by the potential opportunities for US equities.”