Editor
So, the term “Magnificent Seven” continues to create buzz on Wall Street, but veteran fund manager John Barr believes it’s time to broaden our horizons. He admits that while the excitement isn’t over, investors diving into just a handful of popular stocks might be overlooking some much larger opportunities.
Barr has done a fantastic job managing the Needham Aggressive Growth Fund (NEAGX), achieving impressive returns over the past five years without heavily betting on tech giants like Nvidia or Tesla. Beyond a small investment in Apple, his portfolio deliberately steers clear of those headline-grabbing names.
Instead, Barr is all about seeking out the hidden gems—companies that are essential to the AI revolution but aren’t getting the limelight they deserve. This approach has led to impressive returns, all while flying under the radar!
Beyond the Buzz: Why Hidden Tech Stocks Might Outperform
When it comes to investing in the tech landscape, Barr has a down-to-earth strategy that’s refreshingly clear: he focuses on companies that provide the essential tools, parts, and platforms that tech giants depend on, particularly in the booming AI sector. While everyone likes to rave about ChatGPT or the latest Nvidia chips, Dana Lerner, a senior equity analyst at Arcadia Research, points out a crucial fact: there’s a lot more behind the scenes. Someone needs to keep the servers cool, test the chips, and refine factory processes. That’s where the real opportunity lies.
Take Vertiv Holdings (VRT) for instance. This company, with its roots stretching back to 1946, plays a vital role in constructing data center infrastructure like cooling systems and backup power. As the demand for AI data processing skyrockets, Vertiv is set to benefit from the upsurge in server setups. The stock has already seen impressive growth, but Barr has a hunch there’s more to come. He likens AI data centers to Formula 1 cars—fast, hot, and demanding a top-notch pit crew like Vertiv.
The Small-Cap Advantage: Four Semiconductor Support Stocks to Watch
If data is the new oil, then semiconductors are definitely the pipelines fueling this digital age. Barr’s portfolio is laden with companies that keep this crucial infrastructure running smoothly.
Let’s talk about FormFactor Inc. (FORM) for a moment. This company specializes in innovative “probe cards” that test chips during the manufacturing process. With artificial intelligence continually pushing the demand for high-bandwidth memory, FormFactor is a key player working behind the scenes.
Then there’s Camtek Ltd. (CAMT), which recently introduced its Eagle G5 and Hawk inspection systems designed specifically for high-performance computing chips. Their steady revenue growth really deserves more attention than it has been getting.
PDF Solutions (PDFS) is another gem, offering essential analytics that enhance chip yield and quality. Barr emphasizes that even a slight increase in yield can translate to significant savings—think millions of dollars.
Last but not least, Arteris Inc. (AIP) focuses on interconnect technology in system-on-chip designs. As chips become increasingly intricate, this tech is becoming indispensable. As one analyst aptly put it, it’s like the nervous system in the brain.
AI Isn’t a Bubble—It’s a Buildout
There’s been a lot of chatter about an AI bubble lately, but in my opinion, we’re really just scratching the surface of what’s to come. One insider, Barr, likens today’s AI landscape to electricity’s infancy. While everyone’s buzzing about new applications, we’re still building the essential infrastructure like semiconductors, data centers, and factory automation. This trio is where the real potential lies!
Reshoring the Future: U.S. Industrial Tech Stocks
Let’s talk about a fascinating trend I’ve been diving into lately: the revival of American manufacturing. In the wake of COVID and the subsequent shake-up in tariffs, companies are revamping their supply chains, and automation is taking the spotlight.
Two stocks that I’ve got my eye on in this space are Vishay Intertechnology (VSH) and Cognex Corp. (CGNX). Vishay is a major player, supplying components that power everything from electric vehicles to factory robots. They’re ramping up production at new facilities in Mexico and Wales, which is exciting for the future of manufacturing.
Then there’s Cognex, which focuses on machine vision systems that spot production flaws—super crucial for e-commerce warehouses that continue to thrive. What’s interesting about both these companies? They have low coverage, consistent performance, and what Barr refers to as “hidden compounder” potential. In other words, these stocks could really take off over time without attracting too much attention. It’s definitely worth keeping an eye on them!
Investing in What Others Miss
In today’s market, where everyone’s focused on a few flashy stocks, Barr’s unique approach really shines. He’s betting big on infrastructure and industrial sectors, along with those lesser-known companies that are making waves in the AI world. This strategic move positions him for some solid, long-term gains.
Analyst Dana Lerner sums it up perfectly: “Most people invest with the rearview mirror. John’s looking through the windshield—and he’s picking up speed.” As AI transforms industries from chip design to manufacturing, it’s these behind-the-scenes enablers—rather than just the headline stars—that are likely to deliver the best returns.
