My passion for Wall Street research first led me, more than 40 years ago, to my exclusive formula for uncovering market-beating stocks…
Back in college at Cal State Hayward in the late 1970s, everyone believed it was impossible to beat the market without taking on excessive risk.
“Sure,” many said, “some traders can be lucky for a while, but no one can consistently beat the market.” At that time, most investors were content to invest in index funds like the S&P 500.
Thankfully, I was taught by a group of open-minded professors who offered me the investing chance of a lifetime. They gave me unprecedented access to Wells Fargo’s mainframe computers to build my very own stock selection models. This was before PCs and laptops, so this was a tremendous privilege.
With only a calculator and limited access to the computers, I actually started my first newsletter in my dorm room at school. I spent countless hours learning how to read and research market data and built a stock selection model designed to mirror the S&P 500.
I worked like an investigator who had to reenact the crime, generating the precise conditions of the S&P – the same level of risk as the index, and the same industry weighting as the index.
But things didn’t turn out as I planned. When I ran the model, my returns came out considerably better than the S&P 500!
I was stunned by such results – and naturally determined to get to the root of what happened.
What I found was that a select group of stocks consistently outperformed the S&P in my model. These were smaller, supercharged companies that all had certain characteristics in common: positive earnings revisions, positive earnings surprises, sales growth, operating margins, free cash flow, earnings growth, positive earnings momentum and return on equity (ROE).
So, in today’s Market 360, I’ll share how those characteristics led to market-beating gains for my Accelerated Profits subscribers in two unknown stocks in completely unrelated industries: Super Micro Computer, Inc. (SMCI) and Vista Energy (VIST).
And then I’ll reveal how you can find stocks with the potential to post big returns, too.
Earnings Work for Super Micro Computer & Vista Energy
Founded back in 1993, Super Micro Computer Inc. has been at the forefront of technological change, developing a lot of firsts in the industry: the very first x86 server boards based on Orion semiconductors, the first server boards to support Intel Pentium processors, the first redundant cooling power supply, the first dual Intel Xeon server – just to name a few!
Today, Super Micro Computer is well-known as a global leader in high performance server technology solutions. The company continues to provide a wide range of servers, storage, motherboards, workstations and networking solutions, as well as server management software. Super Micro Computer’s solutions are utilized in several markets, including artificial intelligence, 5G, Internet of Things (IoT), data centers, cloud computing, big data, enterprise, embedded and edge computing.
Vista Energy operates in the biggest oil and gas shale area outside of North America, Vaca Muerta in Argentina. Vista Oil & Gas also has operations in the Macuspana Basin in Mexico, with a 100% operating interest in the contract for block CS-01.
I recommended Super Micro Computer to my Accelerated Profits subscribers in June 2022 and Vista Energy in February 2022. As of this writing, they are up 87% and 142%, respectively. While these are two very different companies, they had two key factors in common: stunning earnings and sales growth.
Since my recommendations, the companies have continued to post great earnings and sales growth.
Triple-Digit Earnings Growth in Latest Quarters
Case in point: During Super Micro Computer’s second quarter in fiscal year 2023 (announced on January 31), total sales increased 58.1% year-over-year to $1.85 billion, which topped estimates for $1.78 billion. Second-quarter earnings surged 270.4% year-over-year to $3.26 per share, up from $0.88 per share in the same quarter a year ago. The consensus estimate called for earnings of $3.03 per share, so SMCI posted a 7.6% earnings surprise.
Company management noted that it was another record quarter in terms of revenue, and it is “confident and excited for fiscal 2023 and beyond.” For the third quarter, SMCI expects sales between $1.42 billion and $1.52 billion and earnings per share between $1.88 and $2.14. That compares to earnings of $1.55 per share and sales of $1.36 billion in the third quarter of 2022. Earnings estimates were in line with current projections for $2.12 per share, but sales were shy of forecasts for $1.60 billion.
Vista Oil & Gas revealed on February 24 that it produced 54,718 barrels of oil equivalent per day (boed) during its fourth quarter, which represented a 33% year-over-year increase. Oil production rose 41% year-over-year to 45,745 barrels per day. Fourth-quarter revenue rose 57% year-over-year to 308.1 million Mexican pesos, while adjusted earnings jumped 383% year-over-year to 171 million Mexican pesos. In U.S. dollars, fourth-quarter adjusted earnings increased 387.5% year-over-year to $1.95 per share, which smashed estimates for $0.93 per share by 109.7%.
I should also add that both receive an A-rating for their Quantitative Grade in Portfolio Grader, so they are backed by strong fundamentals and persistent buying pressure – a recipe for further growth.
So, it’s no surprise that the stocks have been on strong runs recently, with both hitting new 52-week highs just this week!
I’m pleased to say that my Accelerated Profits subscribers have been able to reap the rewards of the stocks’ strength, too. I recommended selling one-third of SMCI shares on August 2022 and one-third of VIST shares on September 14. Those who had invested $7,500 when I first recommended the stocks would’ve claimed about a $3,540 return on SMCI and about a $3,330 return on VIST on their initial investments.
The Bottom Line
It always boils down to earnings.
The reality is fundamentals matter, and as you learned today, both Super Micro Computer and Vista Energy boast stunning fundamentals. At the end of the day, fundamentally superior companies, i.e., the ones with strong earnings and sales growth, will emerge as the market leaders. This is why I only recommend fundamentally superior companies in all my Navellier services.
Super Micro Computer and Vista Energy aren’t the only fundamentally superior companies I like right now. My Accelerated Profits Buy List is chock-full of companies that are well-positioned to climb higher and offer the potential for even more profits. In fact, I just recommended a stock on Monday that some might call an architect to the energy industry that’s forecast to post 200% earnings growth in its first quarter.
For the company name and details, as well as full access to my Accelerated Profits Buy List, sign up for Accelerated Profits today.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Super Micro Computer, Inc. (SMCI), Vista Energy (VIST)