Technology investors who embraced the Magnificent 7 are delighted. The accelerating demand for AI resulted in Super Micro Computer (SMCI) gaining 187.4% in the first half of 2024. Nvidia (NVDA) trailed with a 149.5% return while Vistra (VST), an energy supplier to AI server centers, added 124.6%
In the second half of this year, those stocks will need continued momentum to hold their gains. Valuations are highly stretched for the best-performing stocks on the index. For example, NetApp (NTAP), up by 47.6%, has a poor relative valuation against its peers. This is offset by a strong overall grade, based on its profitability, balance sheet, net margin, and stock sentiment. Investors considering companies with strong EBITDA and EPS growth may overlook valuation concerns.
Broadcom (AVGO), Deckers Outdoor (DECK), Qualcomm (QCOM), Netflix (NFLX), and Crowdstrike (CRWD) are among the companies with strong overall ratings compared to its peers.
Micron Technology (MU), which gained 54.3% in 1H/2024, is a stock to be wary of. Investors may find better value from Intel (INTC) or better operating margins from Lam Research (LRCX) or Analog Devices (ADI).
Your Takeaway
Investors who avoided poor-performing companies in consumer retail markets will continue to outperform the index. Walgreens Boots (WBA) and Lululemon (LULU) look like cheap stocks. However, markets continue to worry about their prospects.
