We recently compiled a list of the 8 Best Bargain Stocks To Buy in October. In this article, we are going to take a look at where Super Micro Computer, Inc. (NASDAQ:SMCI) stands against the other bargain stocks.
The Aftermath of an Easing Cycle
September has historically been sluggish for stocks. However, with an easing cycle and an upcoming election in store, the results this year may be untypical. On September 26, Tom Lee, Fundstrat Global Advisors managing partner and head of research, appeared in an interview on CNBC to discuss the market outlook ahead of the easing cycle.
Lee suggests that an easing cycle indefinitely improves the performance of markets, especially from a historical standpoint, hinting that with 40 days to the election, the market may change its course of action accordingly. While stocks reposition themselves positively after an easing cycle, the markets may see delays, especially because investors are more likely to wait until after the results are out.
Lee added that rallies in November and December will be significantly high, especially when markets have been up more than 10% in the first half of the fiscal year 2024. While the economy is not officially in a recession, the number of investors and analysts who believe the economy is going down is immense. Therefore, to get investors on the move evidence has to be better than expected.
What do the Elections Mean for Markets?
The 50 basis point cut may have redeemed positive results for the market. On September 28, Matt Powers, Powers Advisory Group managing partner, appeared in an interview on Yahoo Finance to discuss the plausible sectors to target as elections approach.
Powers shared that inflation numbers validated the 50 basis point cut, showing positive economic signs. However, he does reiterate that there will be some short-term volatility, especially in October.
According to him, investors must focus more on stocks in the defensive sectors, including utilities, consumer staples, and financials. Powers advises investors to spare some short-term equity but focus on long-term and medium-term results. Overall, he believes that the market is more balanced and a reallocation to the dividend stocks and dividend ETFs is highly probable.
Now that we have studied the aftermath of the easing cycle and the market outlook before an impending election, let’s take a look at the 8 best bargain stocks to buy in October according to analysts.
Our Methodology
To come up with the best bargain stocks in October, we used the Finviz screener to find stocks trading at a forward P/E of less than 20. We sorted our screen by market cap and went through the 30 biggest stocks. We then shortlisted the stocks that were the most popular among hedge funds, as of Q2 2024, and that analysts saw the most upside to. The stocks are ranked in ascending order of analysts’ upside potential.
Why are we interested in the stocks that hedge funds pile into? 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 team of technicians in a server room, testing and managing the newest server solutions.
Super Micro Computer, Inc. (NASDAQ:SMCI)
Forward P/E as of September 28, 2024: 12.51
Analyst Upside Potential as of September 28, 2024: 51%
Number of Hedge Fund Holders: 47
Super Micro Computer, Inc. (NASDAQ:SMCI) is an information technology company based in California, United States. The company provides computing, storage, networking, and green computing technology solutions. It specializes in developing enterprise, cloud, AI, Metaverse, and 5G Telco/Edge infrastructure.
With operations in more than 100 countries, Super Micro Computer, Inc. (NASDAQ:SMCI) ranks second on our list of the best bargain stocks according to analysts. The fiscal year 2023 was a turning point for the company in financial terms. SMCI logged its first $2 billion in quarterly revenue and its first $7 billion in yearly revenue in 2023, driven by its expansions in Asia and value-added AI solutions.
The company is thriving in the server segment. Last week, it introduced high-performance Intel-based servers for AI, Cloud, and Edge. Earlier in June, Super Micro Computer, Inc. (NASDAQ:SMCI) added 3 new manufacturing facilities in Silicon Valley and globally to support the accelerating demand for AI and Enterprise solutions. According to the company’s CEO, the new servers will help SMCI develop customized solutions for their clients.
In the fiscal year 2024, Super Micro Computer, Inc. (NASDAQ:SMCI) logged $14.94 billion in revenue, up by 110% year-over-year, driven by its new AI infrastructure. Note that the company’s FQ4 2024 revenue alone exceeded the revenue for the complete fiscal year 2022. Such testifies to SMIC’s growth potential amid the AI boom, and why it is one of the best bargain stocks to buy.
Overall SMCI ranks 2nd among the 8 best bargain stocks to buy in October. While we acknowledge the potential of SMCI 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 time frame. If you are looking for an AI stock that is more promising than SMCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.