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Best Stocks: An under-the-radar play on the AI buildout that was founded more than 90 years ago
Best Stocks: An under-the-radar play on the AI buildout that was founded more than 90 years ago

CNBC

time7 hours ago

  • Business
  • CNBC

Best Stocks: An under-the-radar play on the AI buildout that was founded more than 90 years ago

(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — During the last earnings season, the hyperscalers all affirmed their guidance for capital expenditures this year. The AI data center and infrastructure buildout is not slowing down. Earnings results and AI-related commentary from Oracle and AMD over the past week make it clear that this theme remains on fire. Lots of the companies on the Best Stocks in the Market list are direct or indirect beneficiaries of all this spend. Today we're going to introduce you to a name you may not have heard much about yet. In 1932, inventor Arthur Schmitt founded a company to produce electrical connector components for radios in Chicago. Before long, military demand for these components and others skyrocketed thanks to the run-up into World War II. Nearly a century later, Schmitt's company, now called Amphenol (APH) , is still supplying these components to customers around the world. If it has cables, printed circuit boards, sensors, antennas or modules, it needs connectors to make all these things work together. Amphenol's products enable secure, high-performance connections, especially in harsh or high-speed environments where durability is not optional and only the top quality components will do. Amphenol is in three businesses: Harsh Environment Solutions sells ruggedized connectors, cable assemblies, and sensors for aerospace, defense, industrial, and automotive applications. Interconnect & Sensor Systems is made up of commercial electronics, automotive sensors, and fiber‑optic/copper connectors. But it's their third and largest business that we're focused on today. Despite the diversified nature of the company, the upside surprises are coming from their involvement in the global data center build-out. This vertical — Communications Solutions — is 45% of Amphenol's business and growing rapidly, fueled by incredibly strong demand coming from broadband, mobile networks and data center interconnects. After the last earnings report, which Sean will detail below, Wall Street woke up to the fact that there's no AI without connections between the chips and the hardware, the servers and the electrical equipment, the architecture and the energy. Amphenol's products are involved at every stage of this. Best Stock Spotlight: Amphenol Corp (APH) On the list since: 12/16/2024 One-year price chart with moving averages, RSI: Sean — Amphenol has as pretty of a chart as you'll find. Below is a total return price chart over the past 5 years using a logarithmic scale (On a log scale, equal vertical distances represent equal percentage changes, so a move from $10 to $20 - a 100% gain - looks the same as a move from $100 to $200, it helps visualize longer term charts): The stock has seen some downtrends over the past 5 years, but its long-term trend is incredibly consistent - up and to the right. Looking at the stock on a weekly basis, buyers have tended to come in around the 50-week moving average. And if you're lucky enough to have a shot at the 200-week, investors are hammering the buy button. Every move toward the 200-week was followed up with heavy buying volume over the past 5 years: There are not many stocks that have shown this type of strength over long stretches of time. Going back to June of 2020 (5 years), this stock has spent 82% of its time above its 200-day moving average. Comparable to Nvidia Nvidia (NVDA), which is possibly the best stock to have ever existed, spent about 80% of its time the past 5 years above its 200-day moving average. Not to proclaim that this is the next NVDA, but this highlights how strong of a stock this is, and more importantly, how difficult it can be to wait for a dip. The stock is just as strong on a fundamental basis. From its Q1 earnings, Amphenol hit a record $4.8B in sales, up 48% year-over-year. EPS came in at $0.63, up 58% year-over-year. The company achieved record adjusted operating margin of 23.5% in Q1 2025, representing a 250 basis point improvement from 21.0% in Q1 2024 (1 basis point equals 0.01%0. Earnings growth and margin expansion were primarily driven by strong operating leverage on stronger sales volumes. The most significant growth driver was the IT datacom market, which represented 33% of sales and grew 134% organically year-over-year, with particular strength in artificial intelligence-related applications. (Earnings data via Quartr) AI is a massive driver for this company. The CEO had this to say on what's going on with AI: "It is a revolution that creates for our industry a disproportionate opportunity because of the unique nature of the architecture and the intensity of the interconnect solutions that are associated with that architecture. And so when you stack that all together, it's a great revolution. It's a more interconnected intensive revolution, and we've taken more than our fair share of that. The result has been that our IT datacom business has grown very robustly." This stock has a great story, strong technicals, and exciting fundamentals. What more could you ask for? Risk Management: Josh — It's tempting to look at the chart of Amphenol and say "Well, I guess I missed it." And, of course, you're certainly not looking at a ground floor buy-in here. But it's been my experience that more stock market opportunities have been lost by people thinking they already missed their chance than for any other reason. If you've been investing for a while, it's likely you already have some of your own war stories of this variety — Tesla, Bitcoin, Netflix, Nvidia, Broadcom, Palantir, etc. It's really hard to buy a stock that's just doubled. It's even harder to imagine a doubling happening again. Having a solid risk management plan in place prior to entry can help investors over this mental hurdle. APH is currently in the process of consolidating its huge post-earnings rally. RSI has cooled off to just below 70 and that's a good first step. I'd be watching for a price dip into the high $80s, which would be a retest of the most recent breakout area before entering the position. The risk of waiting for that lower entry is you may not get the chance. It happens. Traders will want to keep an eye on the rising 50-day, currently $81.50, as a place to lighten up or exit. Investors will want to give this situation the benefit of the doubt and a little bit of a longer leash. There's a gap below $71, I like that level as a stop as it would tell me the sellers have taken control and something may have changed with the story. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.

Josh Brown says AI story and US consumer are the only two things that matter to the markets
Josh Brown says AI story and US consumer are the only two things that matter to the markets

CNBC

time3 days ago

  • Business
  • CNBC

Josh Brown says AI story and US consumer are the only two things that matter to the markets

Josh Brown, CEO of Ritholtz Wealth Management, said Tuesday the stock market is being dictated by two factors — the artificial intelligence investing theme and the strength of the U.S. consumer — and both are in solid place right now. "If you understand that the AI story and the U.S. consumer are the only things that matter, you could stop wasting your time reading a lot of other data and focusing on a lot of other reports," Brown said on CNBC's " Halftime Report ." His comment came after data showed consumer spending retreated more than expected in May. Sales dipped 0.9% on the month, worse than the Dow Jones forecast for a 0.6% fall. Still, Brown believes the U.S. consumer, which he thinks is the most important engine of global growth, remains on solid footing despite the weak data. .SPX YTD mountain S & P 500 "The consumer is fine and the 'Mag 7' AI theme is intact. If I told you nothing else, that would be enough to understand why we're on the verge of a new record high," Brown said. The S & P 500 has fully made back the losses during April's tariff shock and is up about 2% on the year. The equity benchmark is now only 2.4% below its record high reached in February. Investors are also waiting for the Federal Reserve's policy decision Wednesday. The central bank is largely expected to hold rates steady. DISCLOSURES: All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.

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