Top Rated Stocks To Watch This Week - Jan. 22, 2024
AInvestMonday, Jan 22, 2024 3:22 am ET
7min read

In the stock market where opportunities and risks coexist, stock selection is of paramount importance for every smart investor. Here, we have some very good investment opportunities that can assist investors. Combines fundamental analysis and quantitative screens to uncover promising companies that have the potential to become market leaders.

Additions

There are several new additions to the Top Rated Stocks this week.

1.Taiwan Semiconductor Manufacturing Company (TSM)

Taiwan Semiconductor Manufacturing Company (TSM) revealed a positive outlook for the future, showcasing its confidence in near-term fundamentals and predicting more than 20% revenue growth in 2024. TSM's sunny 2024 outlook was met with enthusiasm, with shares rising by 5.7% and contributing to a boost in the semiconductor sector, including companies like AMD, Nvidia, and Broadcom. 

The semiconductor industry experienced a challenging period in 2023, characterized by a prevalent inventory glut across the supply chain. TSM, as the world's largest contract chip maker, faced a 2% decline in revenue and a 19% drop in net profit for the October-December quarter. The company also reported a rare 9% decline in full-year revenue. 

The slowdown was partly attributed to smartphone and computer manufacturers digesting inventories accrued during the pandemic electronics boom. However, there are indications that the electronics downturn is finally over. 

TSM forecasts a return to growth in the current quarter and expects revenue to increase by more than 20% in 2024. Encouragingly, the smartphone market has started expanding again, with global shipments in the fourth quarter of 2023 growing by 8.5% compared to a decline of 3.2% for the entire year. Click here to review the article.

2.Fastenal Company (FAST)

Bullish investors highlight Fastenal's vending and on-site programs, which they believe provide a long growth runway. The company's national scale, broad product portfolio, and inventory management services are seen as key differentiators, enabling Fastenal to gain market share from smaller distributors, especially in the non-fastener segment. Additionally, Fastenal's robust free cash flow generation and shareholder-friendly capital allocation strategy are other cornerstones of the bullish argument.

As Fastenal prepares to unveil its latest earnings, investors are keenly observing how these various factors will play out in its financial performance. The company's ability to navigate market challenges, maintain its competitive strengths, and seize growth opportunities will be critical in determining its investment value.

Currently, with a consensus rating of Hold from 12 Wall Street analysts, Fastenal sits at a crossroads. Investors are advised to conduct thorough research and stay abreast of the company's performance trends and strategic responses to emerging market dynamics. The upcoming earnings report will be a crucial indicator of Fastenal's ability to balance its growth prospects with the evolving challenges and opportunities in the industrial supply sector. Click here to review the article.

3.Supermicro (SMCI)

The preliminary results released by SMCI exceeded market expectations, leading to a 5% increase in the company's share price. The projected sales for the second quarter are now expected to be between $3.6 billion and $3.65 billion, significantly higher than the earlier estimate of $2.78 billion. This demonstrates a substantial improvement in anticipated revenue and showcases the company's ability to generate strong sales. Analysts expect SMCI's revenue for the fiscal year 2024 to reach $14 billion.

Additionally, there is an optimistic outlook regarding earnings per share. The GAAP diluted net income per common share is projected to range between $4.90 and $5.05, surpassing the previous estimate of $3.75 to $4.24. The non-GAAP diluted net income per common share is also expected to be higher, with the new guidance ranging from $5.40 to $5.55, compared to the prior estimate of $4.40 to $4.88. These revisions imply a more positive perception of SMCI's profitability and indicate a stronger earnings performance than previously anticipated.

Wedbush noted SMCI's solid results were driven by deals related to artificial intelligence (AI). While it acknowledged some uncertainties, Wedbush remained confident about the correlation between SMCI's performance and the allocation of NVDA's graphics processing unit (GPU) chips. Despite the potential challenges posed by demand outpacing supply, Wedbush interpreted the surge in revenue as a positive indicator for NVDA's growth in the fourth quarter. Wedbush pointed out that Meta, the parent company of Facebook, also made significant investments in AI, which could indirectly benefit SMCI. As a substantial customer of SMCI in the past, Meta's commitment to AI could potentially contribute to SMCI's continued success. Click here to review the article.

4. LiveRamp (RAMP)

LiveRamp (RAMP), a leading data collaboration platform, provided upside guidance for the third quarter of fiscal year 2024). The company expects revenue of approximately $174 million, surpassing Street expectations of $165.32 million. This growth is attributed to strong performance from both Subscription and Marketplace & Other revenue streams. 

LiveRamp anticipates a non-GAAP operating income of approximately $36 million, exceeding the company's previous estimate of $29 million.

In a strategic move to enhance its data collaboration capabilities, LiveRamp has entered into a definitive agreement to acquire Habu, a data clean room software provider, in a cash and stock transaction valued at approximately $200 million. 

The acquisition aims to accelerate RAMPs ability to offer global data collaboration at scale, facilitating seamless data connectivity across all clouds and walled gardens. 

As investors consider LiveRamp's investment potential, they should carefully evaluate the company's ability to capitalize on the growing demand for data collaboration platforms and its capacity to drive revenue through its diverse revenue streams. Additionally, the successful integration of Habu's technology and the ability to expand its customer base will be critical factors contributing to LiveRamp's long-term success. Click here to review the article.

5.Travelers Companies, Inc. (TRV)

Dow component, The Travelers Companies, Inc. (TRV), a leading provider of property and casualty insurance for businesses and individuals,  released its earnings report for the fourth quarter of 2023, exceeding expectations. The company reported earnings of $7.01 per share, easily surpassing Street expectations of $5.08 per share. Revenues also saw a significant boost, increasing by 13.4% year-over-year to $10.93 billion, beating estimates.

Travelers Companies reported net income of $1.626 billion for the quarter, more than double the $819 million recorded in the same period last year. Core income, which excludes net prior year reserve development and catastrophe losses, also demonstrated remarkable growth, reaching $1.633 billion, compared to $810 million in the prior year quarter. This increase was primarily due to a higher underlying underwriting gain, lower catastrophe losses, and higher net investment income.

The company's investment portfolio also contributed positively to its financial performance. Net investment income rose by 24% to $778 million pre-tax ($645 million after-tax). This growth was driven by higher fixed income yields and an expansion of the fixed maturity investments portfolio. Income from the non-fixed income investment portfolio also saw slight growth, primarily due to higher returns from private equity partnerships, partially offset by lower real estate partnership returns.

Looking ahead, Travelers Companies remains optimistic about its prospects. The company believes that its strong fundamentals, excellent margins, and strategic investments will support continued growth and profitability. With record cash flows, Travelers has been able to make strategic investments, return excess capital to shareholders, and grow its investment portfolio to nearly $93 billion. The company is confident in its focused innovation agenda and believes that it is well-positioned for success in 2024 and beyond. Click here to review the article.

Delletions

There are several deletions this week: AAPL, OXY, DIS, XRX, HOOD.

Last Week's Best Performing Stocks

1.Advanced Micro Devices (AMD)

AMD has risen by 35.15% since being selected.

AMD shares have been triangling sideways since fall 2021, ranging roughly between $50 and $150 in a wide-swinging consolidation over two years in the making. Zooming in a bit, the stock is currently trading above rising major MA's. It is flirting up against key resistance in the $125 area. Support sits below in the area around $105-110 where we see the 50- and 200-day MA's.

In conclusion, AMD is a promising long-term investment for those who are willing to accept the risks involved. The company's growth in revenue, strategic positioning in AI, and focus on innovation make it an attractive option for investors who believe in its ability to secure its future in a rapidly evolving tech landscape. However, it is essential to monitor the company's performance closely and make informed decisions based on the latest financial data and market trends. 

In short, there are enormous risks in play here, but enormous upside potential is also within reach. It's a very interesting basket, but it's not a place to hold all your eggs. Click here to review the article.

2.Arm Holdings ( ARM )

ARM has risen by 22.97% since being selected.

While Arm experiences increasing adoption, its stock price may not be justified by its current valuation. The stock currently trades at over 55 times next year's earnings estimates, which is significantly higher than Nvidia's forward multiple. Although Nvidia is adopting Arm for its Grace CPU chips, the majority of Nvidia's revenue is attributed to its core GPU products. Comparatively, other semiconductor players, such as Nvidia, exhibit lower valuation multiples. 

Arm Holdings shows promising growth potential, backed by its dominant position in the chip architecture market and partnerships with industry-leading technology companies. The adoption of Arm's architecture by Nvidia for data center CPUs and the development of Arm-based chips for PCs indicate a growth trajectory. However, Arm's stock valuation appears relatively expensive compared to other semiconductor players. This information should be considered when making investment decisions related to Arm Holdings. Click here to review the article.

3.Costco (COST)

COST has risen by 16.37% since being selected.

Bulls argue that Costco maintains a proven formula for successfully translating its operations across borders and faces minimal direct competition abroad, implying a long runway of growth prospects. With unmatched scale and plentiful consumer data, Costco's pricing and value proposition remain superior relative to competing retailers and should be difficult to replicate. On the other hand, bears counter that as Costco reaches a point of maturity in its U.S. and Canadian markets, the firm's cost leverage may show signs of deterioration. Furthermore, Costco has lagged competing retailers when it comes to digital innovation and omnichannel fulfillment, which could cause customers to favor retailers such as Walmart and Amazon that have prioritized the digital customer experience in recent years.

COST shares have been out in front of the market overall this year, with the stock heading for a test of its all-time highs imminently as it approaches the $610-615 area, where it topped back in April 2022 as the bear market hit its stride. While COST shares are nearing overbought RSI and Bollinger Band levels, they aren't there yet, suggesting bears may need to absorb more pain to see through double-top bets in this trending leader. Click here to review the article.

Summary

Top Rated Stocks is savvy investor's proprietary quantitative system designed to uncover small, fast-growing companies that have the potential to become market leaders.

If you're new to this page, each Monday we publish an updated list of the growth stocks in the market. In-house focus list of the most compelling investment and trading opportunities in the eyes of savvy analytical team. Also incorporates periodic Special Situations reports on theme-based market opportunities.


Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.