Most investors have heard the term ‘Magnificent Seven’ at some point over the years, which contains the Big Tech stalwarts Alphabet (NASDAQ: GOOG), Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA) and Tesla (NASDAQ: TSLA). Business news outlets have provided ample coverage for these Big Tech titans, as they have been the driving force for the overall market rally for quite some time. The artificial intelligence boom has only fueled the seemingly impervious Mag Seven.
However, a recent shift in the markets has emerged recently. The rest of the stock market is now gaining steam and once again catching the attention of investors. Searching for stocks with more reasonable valuations compared to the sky-high Mag Seven, as well as anticipating interest rate cuts in the months ahead, investors have begun warming up to the broader stock market again.
AI Plays Lose Steam, Small-Caps Re-Awaken
The stunning rise of AI over the past year has led to an incredible rally for Big Tech and other associated companies. For example, semiconductor companies, that produce vital chip components that enable AI to operate, have outperformed the overall stock market in the past year.
The PHLX Semiconductor Index (SOX) has rallied over 25% YTD in 2024 and is up over 41% in the past year. By comparison, the S&P 500 (SPX) has gained 14.5% YTD in 2024 and just under 20% in the past year. However, as fears of an AI bubble have come more into focus and focus has shifted to underappreciated areas of the overall market, the SOX index has declined 4.14% over the past month.
Small-cap stocks, on the other hand, have been largely in the gutter for quite some time. In fact, small caps have not been this cheap relative to large-cap stocks in 25 years. However, the shifting market sentiment over the past month has re-awakened the beaten-down area of the market. The Russell 2000 Index (RUT), a leading small-cap index of stocks, has surged 10.70% in the past month alone.
The rotation out of AI and mega-cap tech into small-caps and broad markets seems just to be beginning. For savvy investors, there are plenty of opportunities to be found across the small-cap arena.
This Small-Cap Stock Has Bullish Technicals Backed By Solid Fundamentals
Texas-based human capital management (HCM) solutions provider, Asure Software (NASDAQ: ASUR), is one such small-cap stock that could strongly benefit from the renewed attention to non-AI Big Tech. Asure offers a wide range of HCM solutions for small to mid-sized companies that help them manage their employees. From payroll and taxes to regulation adherence and employee retainment, Asure provides a full-service approach for SMBs at a time when small businesses have been focusing on optimizing their operations.
Asure’s stock chart is looking quite impressive as well. On the daily chart, the recent move higher has the stock nearing a “golden cross,” which occurs when the 50-day moving average crosses above the 200-day moving average. Furthermore, the ADX indicator, which measures the strength of a trend, has moved to the highly watched 30 level. This indicates that the uptrend is very strong.
Moving to the weekly chart, the bullish move appears to still be in the early stages. One of the key factors supporting this is the moving average convergence divergence (MACD) indicator, which has just recently crossed above the zero line. This is a very bullish signal that can mark the beginning of an overall trend higher. On the regular moving averages, the 50-day MA appears like it could be heading for a bullish bounce off the 200-day MA.
Investors should keep an eye on is Asure’s planned second-quarter financial results release set to go out on August 1, 2024. Management previously set guidance for Q2 2024 with a revenue range between $28 million to $29 million and adjusted EBITDA between $4 million and $5 million. Investors await the Q2 results to see how Asure’s quarter fared relative to its estimates, as well as any forward-looking insights into Q3 and beyond.
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