Super Micro Computer, SMCI, is a stock a believe has the potential to be a true market leader in 2024. Two major themes I've been monitoring are crypto and AI, as I believe these innovations may lead to a "Roaring 2020s." As demand for AI infrastructure broadens, stocks like NVDA and SMCI are positioned to profit handsomely off this trend. This is why SMCI was one of the strongest stocks in 2023 and why its' earnings are estimated to grow by 48% in 2024.
There are a few things that really stand out to me about Super Micro Computer. The first is that it has a history of strong earnings and sales growth. In addition, return on equity is a healthy 40% and management owns 15% of its' shares. This indicates that the company is well-run, and its' insiders are bullish on the future. In addition, SMCI has seen a steady increase in fund ownership over the last year, another positive for bulls.
SMCI's chart is what impresses me the most, and frankly, it is the technical side that always outweighs the fundamental perspective. SMCI rallied strong in 2023 from May to August on heavy skyscrapper volume. This type of buying is not your "Aunt Suzy" buying, as William O'Neil would say. It is funds and institutions coming in to purchase the stock. Since then, SMCI has been basing out. I really like the way this base has formed on mostly lighter volume, with mostly constructive action. This January, SMCI has rallied sharply and is now building out the right side of a cup and handle base. I will be looking to purchase SMCI on a pullback towards the 50-day moving average or on a breakout.
Risk right. Sit tight.
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Full Disclosure: I currently own NVDA.
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