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ACI Worldwide

What it does: Develop digital payments software to process credit and debit card transactions with fraud protection.

By Mark David Hartley. ACI Worldwide (NASDAQ: ACIW) may not be a household name yet but it’s more than just another digital payments provider. The Nebraska-based company provides services to a host of well-known local and international clients. Think Co-op, Wendy’s, Westpac and Alipay, among others.

Recent Q1 earnings results revealed a 208% increase in operating cash flow and 93% increase in adjusted EBITDA. However, revenue growth was weak at only 9% and although net income improved, it still came in at a $8m loss. Overall, CEO Thomas Warsop said the results “exceeded expectations.”

It still carries a high level of debt ($1.03bn), with a debt-to-equity (D/E) ratio of 82.3%. That’s a risk if it increases but with earnings forecast to grow, I don’t expect that to happen. In the long term, I think the company has the potential to become a major player in the digital payments arena.

Mark David Hartley owns shares in ACI Worldwide.

Alphabet

What it does: Alphabet is one of the world’s most famous big tech companies, now invested heavily in AI.

By Oliver Rodzianko. In my opinion, Alphabet (NASDAQ:GOOGL) is one of the best investments on the US stock market right now. As such, it’s currently the second-largest holding in my portfolio.

It is incredibly rare for a big tech company to be trading below what it’s worth based on future earnings and cash flow generation. However, in this instance, I think the shares are roughly 10% undervalued based on my advanced models.

To understand the opportunity here more concretely, I compared the investment to Microsoft, which has a price-to-earnings ratio of around 38. Alphabet’s ratio is just 27.

Both are big competitors in the AI arms race. Therefore, Alphabet needs to be careful that Microsoft-backed ChatGPT doesn’t outdo Google’s Gemini.

However, I’m betting Alphabet will continue to be an AI leader over the long term. That’s why I’ll be doubling down on my investment in the company again soon.

Oliver Rodzianko owns shares in Alphabet.

Shopify

What it does: Shopify is a cloud-based e-commerce platform powering millions of online stores worldwide.

By Zaven Boyrazian. Shopify (NYSE:SHOP) has evolved drastically over the last decade. What started out as a simple e-commerce website builder has evolved into a full-stack business ecosystem. The platform handles online checkout, customer analytics, marketing, payment processing, business financing, and even logistics.

As a result, merchants using the Shopify platform are now responsible for approximately 10% of all online transactions in the US. And despite what the volatile share price might suggest, the company is still growing at a double-digit pace, consistently beating analyst expectations. Not to mention that profit and free cash flow margins are also expanding.

The stock does trade at a lofty multiple. So, seeing volatility in the share price isn’t a major surprise. Nor is it the only risk investors have to consider. Worsening economic conditions have created hurdles in the short term. And the firm still has plenty of rivals to compete with like Amazon.

Yet, with explosive long-term potential, these risks may be worth taking, in my opinion.

Zaven Boyrazian owns shares in Shopify.

Super Micro Computer

What it does: The company provides computer hardware such as servers optimised for AI workloads. 

 By Dr James Fox. Super Micro Computer (NASDAQ:SMCI) stock is up 1,000% over 18 months, but that doesn’t mean it’s overvalued. 

The company, which makes hardware solutions, is one of the beneficiaries of the AI revolution. More than 50% of the company’s revenues now come from AI and data centres. 

Super Micro’s innovation and first-to-market approach have seen its share of this lucrative and fast-growing market surge, reaching 8.4% in the last quarter. 

While there may be bigger players in the segment, Super Micro’s open architecture and proprietary liquid cooling systems optimise server performance, and this is vital for demanding AI workloads. 

One concern, as suggested by a handful of analysts, is that hyperscalers are frontloading their CAPEX on data centres and AI, inferring that the current demand is just a spike. 

However, I do subscribe to that forecast. The consensus suggests that earnings will continue to grow by around 40% annually throughout the medium term, leading to a price-to-earnings-to-growth ratio of 0.73. 

James Fox owns shares in Super Micro Computer. 

TransMedics Group

What it does: TransMedics Group is a medical technology company that provides hospitals with its organ care system (OCS).

By Muhammad Cheema. If I had to put all my money into one stock it would be TransMedics (NASDAQ:TMDX).

This is because of how transformative its OCS system has been in the organ transplantation process. It keeps organs fresh for longer and has started taking over the whole process from organ retrieval to transportation. Transplant centers can therefore focus on patient care.

And the company’s results prove how successful it’s been. Quarterly revenue is growing insanely fast, recently rising by 133%. It also became profitable for the first time.

In terms of risks, the company is yet to make a profit on an annual basis. Furthermore, as TransMedics puts more emphasis on the logistics of the process, some focus could be taken away from producing innovative medical technology.

However, I only expect the company to keep growing as organ transplantation is a huge issue. Unfortunately, over 100,000 people in the US are currently waiting for a transplant. Ultimately, TransMedics’ process could help to bring this number now.

Muhammad Cheema owns shares in TransMedics.

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