We recently compiled a list of the 8 Unstoppable Tech Stocks to Buy Now. In this article, we are going to take a look at where Inseego Corp. (NASDAQ:INSG) stands among the unstoppable tech stocks to buy now.
What’s Happening with Big Tech Stocks?
The technology sector has outperformed the market for the past several years. The industry has accounted for more than 30% of the overall market holdings especially led by Big Tech. One of the key factors that skyrocketed the stock prices for these mega-cap tech stocks is the hype around artificial intelligence.
However, we also witnessed the technology sector going into what analysts call an “AI Bubble”, where companies’ revenues are not justifying the large capital expenditure on artificial intelligence. We recently covered the 13 Best American Tech Stocks To Buy According to Short Sellers. We discussed how Big Tech has led the American stock market for several years. Here’s an extract from the article:
This dynamic progress was reflected in the US stock market when it rose more than 3% in the second quarter of 2024. In terms of the trade in artificial intelligence, technology companies remained at the top, and this trend did not appear to be slowing down throughout the quarter. The largest companies have outperformed the market this year, which has been a remarkable trend. The 500 largest companies’ large-cap market saw gains of 4.4% in Q2 YoY, increasing its 2024 return to above 15%. In contrast, the small-cap market saw a 3.3% drop, translating into a 1.6% 2024 return.
Even though technology companies outperformed in Q2 FY2024, Main Street Research’s James Demmert cautions investors not to treat all of them the same. Instead, they should prioritize those tech firms that can deliver consistent earnings, especially in an uncertain economy.
On the other hand, if we look at the recent figures the story tends to present a different picture. Almost a week ago, on August 30, CNBC reported that most of the Magnificent Seven were lower for the week, with investors’ favorite chipmaker taking the biggest hit after it fell short of largely inflated earnings expectations.
Dan Niles, Niles Investment Management founder and portfolio manager, joined CNBC on the same day suggesting investors to look outside of just the Magnificent 7 for the rest of the year. He mentioned that the companies have now declined on average 4% the day after reporting results, against rising 4% after releasing results in the first quarter.
He explained that this downward trend is a fundamental shift, pointing out that if we look at the financials of these stocks and forget the hype for a moment. We will see all these companies reporting their forward revenue estimates going down. Dan Niles acknowledged that it’s popular to talk about AI as these companies are leading the market but at some point, investors want some digestion of the capital expenditure, which has been going up consistently.
The portfolio manager also presented his bull case thesis for the 493 stocks in the S&P 500 stocks. He mentioned that if you look at the market on July 16, this was the time when the S&P 500 hit its all-time high. Since then it has been down around 1%, whereas the Magnificent Seven have been down around 8%.
He mentioned that if you are looking to invest, look for areas that benefit from the rate cuts. Niles mentioned areas like consumer staples, utility, telecom services, and other sectors of the market because he believes that the other 493 stocks will drive the market to new records. Lastly, Niles clarified that he still likes tech stocks but mentioned that it’s the other stocks that are going to benefit from the rate cuts during the rest of the year.
Our Methodology
To curate the list of 8 unstoppable tech stocks to buy now, we used the Finviz stock screener. We screened for technology companies that have gained at least 50% on a year-t0-date basis, as of September 10. We then selected the highest gainers that were the most popular among elite hedge funds. The stocks are ranked in ascending order of their year-to-date performance.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of the latest 5G wireless equipment, capturing the lightning-fast speed of the technology.
Inseego Corp. (NASDAQ:INSG)
Year-to-date Share Price Gain as of September 10: 579.48%
Number of Hedge Fund Holders: 3
Inseego Corp. (NASDAQ:INSG) is a leader in 5G mobile technology and fixed wireless solutions for mobile networks. The company designs products that help connect devices to 4G and 5G internet such as Mobile Hotspot and Routers. It also offers cloud management solutions that help companies manage their network devices remotely.
Inseego Corp. (NASDAQ:INSG) serves businesses, commercial customers, and governments through its technologies.
Management has remained focused on growing the business of the company through enhancing its product portfolio and delivering strong operating results. The company recently launched its new Inseego Ignite Channel Program and has already signed a new distributor and around 27 value-added resellers.
Moreover, its products are gaining traction in the public sphere, for instance, its MiFi® X PRO sales increased subsequently across all carriers. As a result, its revenue for Q2 2024 was above expectations and reached $59 million. Inseego Corp’s. (NASDAQ:INSG) earnings and profit margins also improved significantly during the quarter. Adjusted EBITDA for Q2 2024 was $8.4 million, with gross profit margins increasing from 35.7% to 39.0%, year-over-year.
Management is making strides to restructure its capital management and reduce debt. Moreover, the company has maintained its revenue projection range at $54 million to $58 million, indicating management’s confidence in a successful fiscal year.
INSG was held by 3 hedge funds in Q2 2024, with total stakes worth $1.43 million. D E Shaw is the top shareholder of the company, with a position worth $2.38 million.
Overall INSG ranks 1st on our list of the unstoppable tech stocks to buy. While we acknowledge the potential of INSG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure. None. This article was originally published on Insider Monkey.