Investors have always searched for signs of bullishness in stocks that the market has discounted. The pursuit of value is never-ending. Those who can find bullish sleeper stocks among shares plagued by bearish sentiment stand to make a lot of money.
Two of the stocks discussed below are plagued by bullish sentiment. Each of those shares has plenty of positive catalysts, which suggest reasons for bullishness. The other stock is, or you’ll be the most important company now. Investors continue to wrestle with valuation concerns regarding that stock. Ultimately, I believe bullishness will prevail in its case.
Alibaba (BABA)
Alibaba (NYSE:BABA) stock continues to be plagued by bearish sentiment that has lowered its stock price.
Once the darling of China’s Tech scene, the company has slipped of late. Other e-commerce firms from China have taken their place—namely, PDD Holdings (NASDAQ:PDD). The company owns Temu, which continues to redefine Chinese e-commerce. Temu’s emergence provides yet another reason to be bearish on Alibaba. China is facing a period of deflation proving stickier than initially anticipated. That makes Alibaba particularly risky at the moment. However, many contrarians are beginning to bet on Alibaba at this time.
Michael Burry, made famous in The Big Short, is among them. Alibaba currently represents the largest holding at Scion Asset Management, Burry’s firm.
Yet, Burry’s opinion is just one of many. Investors looking for other reasons to bet on Alibaba should also consider that the company is the largest cloud provider in China. The company is analogous to Amazon (NASDAQ:AMZN) in its composition, boasting a dominant cloud business. Cloud is one of the biggest areas of AI investment and potential, giving Alibaba an upside.
Micron (MU)
Micron (NASDAQ:MU) is a chip stock that remains undervalued. The company is among the best-known providers of memory chips in the semiconductor conductor industry.
Generally speaking, the chips that Micron provides are in high demand. They have applications across a number of important and growing markets. Memory chips are vitally important to the continued growth of the artificial intelligence and machine learning markets. Furthermore, Cloud computing, 5G and The Internet of Things (IoT) will require greater volumes of memory chips.
Yet, the semiconductor industry remains mired in a negative period of cyclicality. The semiconductor industry routinely undergoes boom and bust periods, resulting in rapidly shifting tides. The belief that Micron is a bull in bear’s clothing is somewhat of a contrarian opinion. The stock has much more upside than downside based on its current price. The fact that leading firms in the semiconductor industry are bullish about 2024, namely Taiwan Semiconductor Manufacturing (NYSE:TSM), may be enough for investors to establish a position.
Nvidia (NVDA)
It’s difficult to characterize Nvidia (NASDAQ:NVDA) as a sleeper stock. Just about every investor is aware of its emergence over the past year.
Furthermore, bearish investors cite valuation metrics such as its relatively high P/E ratio. Those Bears remain steadfast in their belief that Nvidia is overpriced. They use that notion to logically argue that share prices should move lower in the immediate future.
I’ll make the same simple counterargument I’ve made several times regarding that idea: More than 11% of all semiconductor firms currently have a higher P/E ratio than Nvidia. One could easily argue that Nvidia is in the 99.99th percentile of all firms. Its valuation suggests that it is only trading in the 89th percentile. That poses a simple question: is Nvidia better or worse than 89% of its peer group? If you’re like me, you believe it is better and thus deserving of a higher price moving forward.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
