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Stocks that have fallen below $15 are usually not viewed very positively by the market. But sometimes such stocks have significant catalysts that the market is overlooking or undervaluing.
Here’s what investors need to know about these three stocks to buy.
Stocks to Buy: Advanced Micro Devices (AMD)
AMD stock has multiple positive catalysts, including meaningful improvements in its processors, the growth of the video game sector, and the proliferation of artificial intelligence, or AI.
Stifel recently upgraded AMD stock to Buy from Hold and downgraded Intel Corporation(NASDAQ:INTC) stock to Hold from Buy, according to CNBC. Stifel believes that AMD’s processors have largely caught up to those of Intel, giving AMD the opportunity to gain market share “in the PC space.”
AMD also has the opportunity to gain market share in the artificial intelligence, or AI, space. Writing in Forbes in November, research firm Trefis noted that AMD currently has 30% market share in the discrete graphics processing, or GPU segment.
If AMD’s market share in machine learning GPUs, which are used to power AI, can reach even 3%, AMD’s revenue would jump by $3 billion, according to the firm. Since AMD’s total 2017 revenue was $5.33 billion, that would be a huge windfall for AMD and of course would provide a tremendous boost to AMD stock.
Finally, AMD stock should be boosted by the continuing growth in the popularity of video games. According to a Forbes contributor, “With data going back to 2011 (it’s) easy to see that video games are gaining over 1 billion a year in spending.” Graphics cards are an important part of PC gaming, and AMD’s Radeon chip appears to be a high quality, low-cost graphics card.
Although some have expressed concern that AMD is dependent on cryptocurrency for much of its revenue, leaving it vulnerable to cryptocurrency crashes, this columnist pointed out that cryptocurrency may have hurt the company’s gaming business by causing increases in graphics card prices. Moreover, some gaming fanatics may have become cryptocurrency mining fanatics, undermining their spending on video game systems. So a collapse of the cryoptocurrency craze could result in a corresponding boost of the company’s gaming business.
Stocks to Buy: American Superconductor Corporation (AMSC)
With a market cap of just $127 million, AMSC stock is trading like a company that could go bankrupt at any time. But the company’s status as a U.S. Navy contractor would seem to make that highly unlikely. The Navy is probably annoyed when one of its high tech contractors go bankrupt, and it probably takes steps to prevent that from happening. I’ve never heard of a U.S. military contractor going bankrupt.
Meanwhile, one of AMSC’s largest problems has been the travails of its Indian wind energy partner, Inox. But, as AMSC pointed out recently, “Inox has participated and won in each of the first two national power tender auctions.” Additionally, India’s wind energy market is growing by leaps and bounds, and wind energy prices there have rebounded recently.
Furthermore, in 2016, a major German company, BASF, agreed to partner with AMSC, validating its technology.
Finally, a U.S. court recently convicted Chinese wind turbine maker Sinovel of stealing AMSC’s intellectual property. As President Trump seeks to safeguard the intellectual property of American companies from Chinese theft, it’s very possible that he will win concessions that will boost the company’s financials and AMSC stock.
Stocks to Buy: Career Education Corporation (CECO)
About a year ago, the Trump administration sent a clear signal that it will allow for-profit education companies to resume using the tactics that made the sector a darling of Wall Street in 2005-2007. The signal sent by the Trump administration was its decision to seek to change a regulatory rule implemented by the Obama administration.
Specifically, the Department of Education decided to seek to change the rule known as gainful employment. And in January 2018, the administration weakened the rule, suggesting that the final version of the regulation will be weaker still.
The rule was part of what The New York Times in a February 20, 2017 article called the Obama administration’s “relentless crackdown” on the for-profit education sector. The gainful employment rule “links vocation schools’ access to federal funds with their record on job placement and earnings,” the newspaper noted, crucially adding that 98% of the affected programs were administered by for-profit schools.
The gainful employment rule was a crucial reason for the large declines in the enrollment of for-profit education schools during the Obama years.
Before the gainful employment rule was introduced by the Obama administration, for-profit education schools recruited very aggressively, with their enrollment surging to 2.4 million in 2010 from 766,000 in 2001. The gainful employment rule probably forced for-profit education companies, including Career Education, to become much more selective about the students they admitted, since under the rules the companies could lose their federal funding if the job placement rates and income of their alumni is very low.
The Trump administration will probably significantly ease that rule, enabling the enrollment of for-profit colleges, including Career Education to surge dramatically. Consequently, the profits of Career Education will surge, as will CECO stock.
As of this writing, Larry Ramer owned shares of ASMC and CECO.