Bargain Hunting in a Pricey Market
The stock market’s current state is a far cry from affordable, with the S&P 500 trading at a lofty price-to-earnings ratio of 28. Even the CAPE ratio, a metric favored by Nobel laureate Robert Shiller, paints a dire picture at 37. JPMorgan Chase CEO Jamie Dimon’s assessment of the market as “kind of inflated” echoes the sentiments of many investors. However, amidst the pricey landscape, there are still hidden gems waiting to be uncovered.
Uncovering a Semiconductor Steal
Micron Technology, a memory-chip specialist, has flown under the radar despite its impressive fundamentals and valuation. As an integrated device manufacturer, Micron’s fortunes are closely tied to the semiconductor cycle, which can be volatile. Nevertheless, the company’s stock has trended upward over the past decade, rewarding investors who weathered the storms.
Currently, Micron is riding the AI wave, with revenue surging 84% in its fiscal 2025 first quarter. Its data center revenue skyrocketed by 400% year over year and 40% sequentially, accounting for a staggering 55% of its total revenue. This remarkable growth, combined with a forward P/E of 16, makes Micron an attractive proposition. The recent dip in its share price following its December earnings report presents a buying opportunity, with the stock now down about 30% from its peak last summer.
Discount Retail’s Hidden Gem
Dollar General, the largest retail banner in the U.S., has historically been a success story. However, last year’s profit decline due to macroeconomic challenges and internal weaknesses sent its stock plummeting. Today, Dollar General trades at a P/E ratio of 12, making it an enticing bargain. Despite suppressed margins, the company’s turnaround plan, focusing on “back to basics” strategies, should help improve profitability. With a dividend yield of 3% and a low valuation, Dollar General’s risk appears priced in, offering significant upside potential.
Don’t Miss Out on the Next Big Thing
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