We recently compiled a list of the 14 Best 52-Week High Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where SAP SE (NYSE:SAP) stands against the other 52-week high stocks.
The U.S. stock market has been on a roll, with major indices clocking double-digit gains even with the U.S. economy showing signs of weakness. The gains have come from investors shrugging off the uncertainty around the U.S. presidential election and monetary policy to continue betting on various counters.
Consequently, the S&P 500 is already up more than 17% for the year, driven by gains in the communication services and financial services sectors. Likewise, technology stocks have also contributed to driving the overall market high as investors continue paying close attention to some of the big plays around artificial intelligence.
READ ALSO: 18 Best 52-Week Low Stocks to Buy Now According to Short Sellers and Top 10 ADR Stocks To Buy According to Hedge Funds.
The tech-heavy NASDAQ index, which gained 18% for the year, comes on growing expectations that the U.S. Federal Reserve has hit the peak of its monetary policy tightening spree. With expectations that the central bank will start cutting interest rates by as much as 50 basis points, according to CNBC, investors’ sentiments around tech stocks have improved significantly for September.
Investors remain optimistic about the stock market outlook heading into year end because of the positive impact of low interest rates. The Fed’s cutting interest rates will result in a significant drop in borrowing costs, which bodes well for capital-intensive businesses looking to access cheap capital.
The central bank aims to achieve a soft landing for the economy. In this situation, inflation must return to the 2% goal without the U.S. economy sliding into a downturn. If the central bank reduces interest rates prematurely, it faces the danger of a severe surge in inflation. Conversely, if it reduces rates too late, it might cause a severe recession.
While interest rate cuts are expected to offer a much-needed boost, disappointing earnings, and lackluster guidance could curtail market gains, especially for the best 52-week high stocks to buy, according to short sellers.
Several companies are under immense pressure after their valuation skyrocketed amid the artificial intelligence frenzy. Consequently, any concerns about slow earnings and revenue growth should send jitters, triggering significant pullbacks.
Adam Turnquist, the head of technical strategy at LPL Financial, mentioned that the S&P 500 typically experiences about three annual declines of at least 5%. On average, it has seen around one 10% decline each year.
“Expressing this data another way, 94% of years since 1928 have experienced a pullback of at least 5%, and 64% of years have had at least one 10% correction,” Turnquist said, according to USA Today. “We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient.”
Looking forward to the rest of the year, experts predict that the best 52-week high stocks to buy, according to short sellers, could keep rising, but they caution about the dangers of premium valuations.
At the same time, financial experts believe that although economic expansion will slow down in the next few months, they don’t see a situation that could cause a recession.
Our Methodology
To compile the list of the best 52-week high stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week highs (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order based on their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A data centre room with cloud technology, illustrating the enterprise application software services.
SAP SE (NYSE:SAP)
52 Week Range: $126.75 – $221.24
Current Share Price: $218.78
Short interest rate: 0.15%
Number of Hedge Fund Holders: 31
SAP SE (NYSE:SAP) is a technology company that provides worldwide applications, technology, and services. It offers software capabilities for finance, risk and project management, procurement, manufacturing, supply chain, and asset management.
The company has been firing on all cylinders following the solid second-quarter results. Revenues were up by 10% to $9.19 billion, driven by a 10% increase in cloud revenue. The Cloud ERP Suite played a pivotal role, recording a 33% rise to $3.78 billion. The company’s cloud backlog, which represents contractually committed cloud revenue, increased 28% to $16.42.
The company’s cloud growth momentum remains strong and is driven by business intelligence. The company also raised its forecast for its 2025 adjusted operating profit to 10.2 billion euros, up from the previous 10 billion euros, due to expected improvements in efficiency from its transformation initiative.
In addition to the solid financial results, SAP SE (NYSE:SAP) sentiments in the market have been boosted after the company embarked on a restructuring drive to bolster margins. It announced plans to restructure 8,000 jobs early in the year as it pushes into AI.
With the restructuring, SAP SE (NYSE:SAP) has been increasing its focus on retaining strategic growth areas, particularly Business AI, and its efforts are already paying off. While the stock is trading close to its 52-week highs, it rewards investors with a 1.10% dividend yield, offering another opportunity for generating some passive income.
As of the end of the second quarter of 2024, 31 hedge funds tracked by Insider Monkey had stakes in SAP SE (NYSE:SAP). During this period, the most significant stakeholder of SAP SE (NYSE:SAP) was Ken Fisher, who had a $974.36 million stake in SAP SE (NYSE:SAP).
Ave Maria World Equity Fund stated the following regarding SAP SE (NYSE:SAP) in its first quarter 2024 investor letter:
“SAP SE (NYSE:SAP) provides enterprise application software products worldwide. SAP is successfully transitioning from a perpetual license model to a SAAS model, which we believe will lead to an increase in TAM (total addressable market), higher margins and lower capital intensity.”
Overall SAP ranks 1st on our list of the best 52-week high stocks to buy according to short sellers. While we acknowledge the potential of SAP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
