FA Alpha Weekly Digest 06 03 2024

Wall Street’s stock picks can’t be trusted and the advertising bias of the mainstream financial media makes their news only sensationalist-driven. Gain an edge by knowing the trends that matter and some of the mispriced stocks in the market.

We bring you the FA Alpha Weekly Digest, a roundup of FA Alpha’s unique and unparalleled equity, credit, and macroeconomic insights over the past week.

In today’s digest, we’ll cover Dell Technologies (DELL), International Business Machines (IBM), Leggett & Platt's (LEG), and Willdan Group (WLDN).

This old dog can still learn new tricks

Early 2024 saw a surge in AI investment, with data centers crucial for AI receiving billions in funding. Tech stocks tied to AI, like NVIDIA, thrived due to this high demand. However, some established players like Dell, despite involvement in AI through partnerships with NVIDIA, are still seen as traditional companies with limited growth potential. This perception might undervalue Dell's role in the AI market, creating a possible investment opportunity despite market skepticism.

The Big Blue could rise again

IBM, a former computing giant, faced challenges adapting to the rise of personal computers and client-server architecture, losing market share to competitors like Microsoft and Apple. Despite a decline in annual revenues from $100 billion to $60 billion, IBM has refocused on high-growth areas like cloud computing and artificial intelligence, making substantial investments in its AI-powered Watson platform and strategic acquisitions. While market skepticism persists due to poor growth expectations, IBM's extensive AI investments hold the potential for significant growth if its transformation strategy succeeds.

Tossing and turning because of the high rates

Rising interest rates are expected to disrupt Leggett & Platt, a company that supplies parts for beds. Higher borrowing costs are putting a setback on the housing market and reducing discretionary furniture purchases. Leggett & Platt's revenue has dipped 8% in 2023, and the company faces difficulties servicing its debt. The recent CEO change adds another layer of uncertainty. Investors are advised to still be wary of this company.

This company will address the energy demand coming from AI

The rapid growth in AI, cloud computing, and IoT has strained global energy infrastructure, necessitating significant upgrades to meet rising electricity demands. Willdan Group (WLDN) is strategically positioned to address these challenges by offering energy efficiency and demand management services, such as retro-commissioning, retrofits, and energy auditing. Willdan's LoadSEER platform uses smart meter data to optimize load profiles and predict impacts of distributed energy resources. They also provide engineering and program management for clean energy projects and administer state-level incentive programs. With the expansion of cloud/AI infrastructure and decarbonization targets, Willdan is poised for sustained growth over the next 5+ years.

We hope you find this week’s FA Alpha Daily articles insightful.

See you next week as we talk about another set of interesting names.

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