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When the Nasdaq 100 (QQQ) closed at an all-time high last Friday, Seeking Alpha noted Meta Platforms (META) and Nvidia (NVDA) contributed to the milestone. Skeptical investors who stayed on the sidelines or chose dividend income stocks over technology ones will doubt the rally’s breadth. Unfortunately for the former group, income stocks, especially real estate investment trusts, risk underperforming. They needed assurances that the Federal Reserve would cut interest rates.
Persistently high inflation rates will keep interest rates at higher levels for longer than bullish investors thought. As valuations stretch further, the rise in firms selling artificial intelligence solutions is not the riskiest sector. Stocks that rode the uptrend without fundamental profit growth have a higher chance of facing panic selling.
To screen for those stocks, find the stocks with the highest one-year return. Remove healthcare and biotechnology stocks from the search. Emerging biotech firms may trade higher on expectations of a new drug coming to market. They may post operating losses in their quarterly report as they invest in the drug’s commercialization.
I also filtered for companies having a market capitalization of $1 billion or more, are based in North America or the U.K., and closed at a 52-week high within the last few weeks.
The 13 companies with the highest returns have varying quality, value, and growth scores.
I highlighted Celestica (CLS) because the electronics manufacturer benefits from the increased spending on AI hardware. It remains a top pick for 2024. CLS stock tripled since its coverage as a top pick for 2023.
Celestica posted consistent growth in revenue and non-IFRS operating margin since 2019.
Investors who may have missed buying Nvidia or Super Micro Computer (SMCI) picked up CLS stock instead. CEO Mandeep Chawla said on the conference call that “we’re seeing a lot of our new winds come in and our demand outlook is with some of the hyperscalers that are at the leading edge of the more complex technologies.”
This strengthens AI/ML computing demand. As a result, Celestica is reporting contract wins for 800G switches. The firm started shipping this hardware in 2024 as volume increases in 2025.
CLS stock is unlikely to fall by much in the near term.
Bears are suffering from short-selling used automotive firm Carvana. The short float is 34.74% (per finviz). The firm posted a 20.8% drop in revenue Y/Y to $10.77 billion. The firm emphasized full-year results to distract bears from the $200 million loss in the quarter. Readers will find the EBITDA loss figure here.
CVNA is enjoying the classic short squeeze. When the short-covering ends, the stock may trade lower as fundamentals hurt the share price.
SMCI stock has a 4.99/5.00 Strong Buy quant rating. It has strong grades in all metrics except value. Its rising growth suggests the stock will not fall on profit-taking.
CleanSpark’s share price depended on Bitcoin (BTC-USD), whose price rose by over 20% in only a week. The firm reported a 12% sequential increase in BTC mining, to 648 bitcoins.
The 12.9% short float is part of the reason for the stock’s strength. In addition, CleanSpark has healthy growth metrics. Expect the stock to continue outperforming, so long as BTC prices hold their level.
When Unity (U) shares plunged after posting weak quarterly results, AppLovin’s decision to abandon buying this firm in Sept. 2022 proved beneficial.
CEO Adam Foroughi said that “there is a lot of content that’s created out of China that comes out West and does benefit advertising-related businesses.” So long as Chinese firms spend more advertising on AppLovin and Meta properties like Facebook, their business will thrive.
The triple return in Abercrombie & Fitch is unusual. The short squeeze is a possible explanation. However, the retailer expects strong holiday sales growth. Additionally, it announced an official partnership with McLaren Racing.
Abercrombie has trending clothing and its brand value is increasing. A pull-back is unlikely.
Vertiv Holdings expects full-year 2024 revenue to grow by 10%. Its acquisition of CoolTera is as accretive to results as its commitment to supporting its customers “reinforce our strong position in liquid cooling for high-density compute applications driven by AI demand.”
CEO Giordano Albertazzi said on the conference call that the supply chain bottleneck is not a constraint to the strong book-to-bill and backlog. Orders are accelerating as the funnel continues to widen. For example, the business enjoys global strength in the Americas, EMEA, and many parts of Asia.
Vertiv would need to post a weak quarter for the stock to fall. The strong momentum suggests that this is not likely.
Similar to CleanSpark, MicroStrategy soared thanks to its purchases of bitcoins. Between Feb. 15 and Feb. 25, the company bought $155.4 million worth of bitcoin for $51,800 each on average. BTC-USD closed at $63,030 at the time of writing. Before that, the firm had an unrealized profit of around $70 billion.
Shareholders have minimal emphasis on MicroStrategy’s $5.62 non-GAAP EPS in the fourth quarter. They hold the stock for the company’s “to the continued development of the bitcoin network through activities in the financial markets, advocacy, and technology innovation.” The firm applies the cash flows as well as proceeds from equity and debt financing to add its bitcoin holding. This serves as its primary treasury reserve asset.
Marathon shares are up mostly thanks to the rise in bitcoin prices. The stock’s quant rating shifted to a strong buy on March 1.
The company lost $0.02 a share in Q4 despite revenue rising by 451.4% Y/Y to $156.7 million. However, that figure excludes the impact of FASB fair value accounting rules. Without the ongoing measurement of crypto assets to fair value, net income improved to $0.66 per diluted share.
Investors cannot predict the price of bitcoin. Therefore, they cannot predict Marathon’s stock direction from here.
Powell Industries supplies tools to monitor and control the distribution of electrical power in commercial and industrial markets. Shares jumped after the firm posted a 52.9% Y/Y increase in revenue, to $194 million. The backlog doubled to $1.3 billion.
CEO Brett Cope said on the conference call that the company expects to launch a more modest expansion for its electrical products factory. The $11 million expansion will expand its fabrication and integration support for large power control rooms.
Powell will diversify its end markets, grow its electrical automation and service segments, and expand its product portfolio. As a result, the firm has sustainable profitability for both fiscal years 2024 and 2025.
Companies with a growing business tend to trend higher. Powell is one of them.
Nvidia made history by becoming the first chipmaker to achieve a $2 trillion market capitalization on Feb. 23. Customers are scurrying to build AI hardware. With Nvidia’s graphics chip providing the tool to do that, investors continue to buy NVDA stock.
Content creation is one of many sectors that Nvidia’s hardware is disrupting. CEO Jensen Huang said”
The amount of inference that we do is just off the charts now. Almost every single time you interact with ChatGPT, that we’re inferencing. Every time you use Midjourney, we’re inferencing. Every time you see amazing — these Sora videos that are being generated or Runway, the videos that they’re editing, Firefly, NVIDIA is doing inferencing.
Investors will notice that media firms like Warner Bros. Discovery (WBD), Sony (SONY), and Paramount (PARA) fell sharply in recent weeks. In addition to weak quarterly results and high debt, AI for creative content creation is unknown in that industry.
Expect continued weakness in the media sector. As investments increase in AI, Nvidia stock will rise in value with this trend.
Modine benefits from higher average selling prices in the Performance Technologies segment. It owes its stronger adjusted EBITDA from the automotive divestiture at quarter end. As a result, it has lower exposure to softness in the automotive market, especially on electric vehicles compared to gas-powered ones.
Weak valuations are not a reason to sell a stock. Modine is a strong stock to own.
XPO rose despite the truckload carrier earning a downgrade from Morgan Stanley. The downgrade has merit since XPO has weak factor grades except on momentum.
In the fourth quarter, the company posted a 6% Y/Y revenue increase to $1.94 billion. It benefited from higher yield and higher tonnage per day in the North American LTL freight (less than truckload freight) segment.
The firm said the four pillars of LTL 2.0 will result in higher growth, profitability, and efficiency through 2027.
Expect XPO’s acquisition of 28 service centers from Yellow Network to sustain business momentum. The firm will integrate prime locations into its network. This positions XPO to serve its customers better than competitors when the market recovers. Eventually, industry capacity will tighten and XPO will report higher margins as a result.
Consider the weak XPO stock grade but do not expect shares to fall as profitability expands.
