Smart Money Is Fleeing Tech for Johnson & Johnson Ahead of the Next Market Storm

Technology stocks make up nearly 40% of the value of the S&P 500 index (SNPINDEX: ^GSPC). It isn't that technology is unimportant, but that its weighting is more than three times that of the next-largest sector in the index. It looks very much like Wall Street is leaning hard into technology, which could be a sign that it is time for smart investors to diversify away from tech. Johnson & Johnson (NYSE: JNJ) could be a good alternative.

Johnson & Johnson is an industry leader

The interesting thing about J&J is that investors aren't giving up on innovation if they buy it. Johnson & Johnson is one of the world's largest healthcare companies, with sizable operations in the pharmaceutical and medical device markets. Both sides of its business are driven by research and development, with intense competition the norm. Simply put, J&J has to be innovative to remain competitive.

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Being so large is one sign of its long-term success in this effort. However, another important one for investors is the fact that J&J is a Dividend King, with over 50 consecutive years of annual dividend increases behind it. You can't build a record like that by accident; it requires strong and consistent execution.

Healthcare isn't optional

So smart investors aren't giving up anything on the innovation front by switching from tech stocks to J&J, but they are getting something very important: exposure to a resilient business sector. Technology stocks have a history of volatility, noting that the last major price surge during the dot-com bubble left the sector reeling for years after the bubble burst. Healthcare tends to be more stable because putting off medical care can have dire consequences.

Notably, the segments of the healthcare industry where J&J competes are particularly important. Drugs and medical devices can not only improve day-to-day life, but they also help keep people alive. A new cellphone can wait, but neither a bear market nor a recession will stop people from paying for life-saving care. That gives J&J's business resilience, making it a good alternative to tech stocks if you are worried about that sector's current popularity.

There's no way to know when, but a bear is coming

This isn't meant to suggest that it is a smart move to sell all your technology stocks to buy J&J. However, a bear market, which would likely hit the hot tech sector very hard, is an innevitability. That's just a fact of life; markets go up and down over time. But if you have tech profits, it might be smart to capture some of those gains and add a resilient business like J&J to your portfolio.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.