Thursday, May 23, 2024

Who Needs Nvidia? Top Funds Madly In Love With This Non-AI Stock.

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The latest list of new buys by the best mutual funds had a conspicuous absence we haven’t seen this year. Including Nvidia (NVDA), Microsoft (MSFT), (AMZN), Meta Platforms (META) and Alphabet (GOOGL), none of the Magnificent Seven stocks earned a spot on this monthly screen. But these savvy investors keep shoveling money into one unglamorous firm: Core & Main (CNM).


While artificial intelligence giants Nvidia, Meta, Microsoft and Google stock go AWOL, top fund managers once again bought into Core & Main — as they have done every month this year.

Propelled by that robust and enduring demand, CNM stock keeps rocketing to record highs with its relative strength line soaring. From a breakout a year ago until notching an all-time high in April, the 2021 IPO soared 128%.

Now Core & Main is adding to its already remarkable run with a fresh breakout. After jumping into buy range Wednesday, the stock has slipped in light volume to test the new buy point.

Meanwhile, although Nvidia, Microsoft and Google stock did not make the list of new buys by top funds, all three of these Magnificent Seven stocks continue to tease record highs.

Core & Main: Unglamorous Building Sector Darling

Based in St. Louis, Core & Main is a specialized distributor with a focus on water, wastewater, storm drainage and fire protection products and related services. The company serves municipalities, private water companies and contractors across municipal, nonresidential and residential markets.

Operating across more than 350 locations across the country, Core & Main has roughly 5,500 employees. The company was added to the S&P MidCap 400 in November.

While not generating numbers nearly as spectacular as its stock performance, the outlook for Core & Main is strong. In its latest quarterly report on March 19, the company posted a 10% spike in earnings to 34 cents a share. For the fourth quarter of fiscal 2023 ended Jan. 28, sales rose 5% to just over $1.4 billion.

Core & Main next reports on June 4. Analysts forecast a 3% rise in earnings, followed by gains ranging from 17% to 20% in the subsequent three quarters. For the full fiscal year, Wall Street sees a 14% rise in earnings to $2.45 per share.

Core & Main Breaks Out — With Two Asterisks

While AI powerhouses Nvidia and Microsoft close in on new buy points and Alphabet nears a record high, Core & Main looks to extend its already impressive run.

The stock drilled past a 60.83 buy point in a flat base on Wednesday, rising nearly 4%. Core & Main has drifted lower in light volume Thursday,  slipping just slight below that entry.

Note that the potential new buying opportunity in Core & Main comes with two points of caution.

First, the new chart pattern is a third-stage base. Such later-stage consolidations are more prone to failure, especially after such a dramatic rise.

Second, Core & Main reports earnings on June 4. A disappointing report or an outlook that doesn’t meet analyst expectations could hurt the stock.

While caution is called for, the clear and strong demand for Core & Main among the best mutual funds shows could fuel a continued run. The stock’s strong 1.9 up/down volume ratio , B+ Accumulation/Distribution Rating and eight quarters of rising fund ownership confirm that demand.

Core & Main sports a strong 96 Composite Rating. That stacks up well against Nvidia (99) and Google (98). The rating, which indicates Core & Main is outpacing 96% of all stocks in terms of key stock-picking factors, trumps the 82 rating for Microsoft.

Follow Matthew Galgani on X, formerly Twitter, at @IBD_MGalgani.


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