We recently published a list of 10 Best Extremely Profitable Stocks to Buy Now. In this article, we are going to take a look at where Super Micro Computer, Inc. (NASDAQ:SMCI) stands against other best extremely profitable stocks to buy now.
Ed Yardeni, president of Yardeni Research, appeared on CNBC on November 27 to share insights on the market’s anticipated performance in 2025. He emphasized the significance of staying invested despite existing risks and high valuations, noting that the economy has shown resilience and interest rates have stabilized.
Yardeni pointed out that many new investors are gravitating toward small and mid-cap sectors, which he considers a sound strategy due to their relative affordability. He also highlighted the S&P 493 stocks as being undervalued compared to the Magnificent Seven, asserting that the overall market outlook remains positive despite potential tariff fluctuations. He believes that tax cuts and deregulation could enhance corporate earnings.
Yardeni attributed much of the market’s potential growth to an ongoing productivity boom, which he described as still being in its early stages. He noted that productivity levels have improved significantly from nearly zero in 2015 to around 2% currently, with historical precedents suggesting that such booms can reach as high as 4%. This improvement is driven by advancements in technology, which he argues will continue to drive productivity gains.
When discussing whether this boom is primarily driven by artificial intelligence (AI), Yardeni acknowledged AI’s importance but also pointed to other technological advancements in cloud computing, robotics, and automation as contributing factors.
He identified a shortage of skilled labor as a key driver of productivity growth and explained that technology has enhanced efficiency, allowing wages to rise faster than prices, thus stimulating economic activity. In his concluding remarks, Yardeni projected that the S&P 500 could reach 7,000 by the end of 2025 and potentially hit 10,000 by the end of the decade, reflecting his bullish outlook on market performance fueled by these economic dynamics.
A team of technicians in a server room, testing and managing the newest server solutions.
To compile the list of the 10 best extremely profitable stocks to buy now, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener, we shortlisted stocks that have grown their revenue and net income by at least 25% over the past 5 years. After sorting our initial list by market cap, we cross-checked the revenue and net income growth rates from Seeking Alpha. We also considered the trailing twelve-month net income and selected stocks that had a trailing twelve-month net income of more than $500 million. Lastly, we ranked the stocks in ascending order based on the number of hedge fund holders in Q3 2024, sourced from Insider Monkey’s database.
Why do we care about what hedge funds do? 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).
5 Year Revenue Growth: 33.68%
5 Year Net Income Growth: 75.82%
TTM Net Income: $1.21 Billion
Number of Hedge Fund Holders: 33
Super Micro Computer, Inc. (NASDAQ:SMCI), also known as Supermicro is a technology company that specializes in creating high-performance servers and storage systems crucial for various applications, including cloud computing, artificial intelligence (AI), and data centers.
Super Micro Computer, Inc. (NASDAQ:SMCI) was quickly recognized as one of the winners in artificial intelligence as the company posted impressive revenue growth on the back of building data centers for third parties. It has grown its top line by 34% and bottom line by 76% during the past 5 years.
However, the stock recently took a hit and has been facing a series of challenges including the failure to file the 10-K form for the fiscal year that ended on June 30, 2024. The deadline for this filling was August 29, 2024, which has still not yet been met. The delay in filling the 10-K form means that the company can be delisted from NASDAQ and would have to trade over the counter. Management has submitted a compliance plan to The Nasdaq Stock Market for an extension period to regain compliance with the Nasdaq continued listing requirements, which if approved will give the company 180 days to fill the said form. Another hit for the stock came when Ernst & Young resigned stating that it was unwilling to associate itself with management’s prepared financial statements.
The delay in filling and the fall in share price is impacting the business of the company. On November 5, Super Micro Computer, Inc. (NASDAQ:SMCI) announced an update regarding its first quarter results for fiscal 2025, which ended September 30, 2024. The company expects net sales in the range of $5.9 billion to $6 billion down from the previous range of $6.0 billion to $7.0 billion. However, on the bright side, the new range at the midpoint is still up 181% year-over-year, driven by strong AI demand from its old and new customers.
Despite the challenges, it is still one of the best extremely profitable stocks to buy now. The stock was held by 33 hedge funds in Q3 2024 and the company has made $1.21 billion in net income over the trailing twelve-month period.
Columbia Acorn Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its Q3 2024 investor letter:
“Super Micro Computer, Inc. (NASDAQ:SMCI) had a tough quarter due to a confluence of negative events. It declined but is still up significantly for the year. While demand for the company’s AI server racks remains strong, with revenue up over 100%, gross margins have fallen sharply for two straight quarters, implying a price war. In addition, Super Micro was the subject of a short-seller report and a delay in filing its annual report with the SEC. We have been taking profits in the stock all year and have only a small position, which we are maintaining given the strong performance and demand for Super Micro’s AI racks and a depressed stock valuation.”
Overall, SMCI ranks 6th on our list of best extremely profitable stocks to buy now. While we acknowledge the potential of SMCI to grow, 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.
