Identifying a stock before it takes off is an elusive goal that many investors share, but spotting three stocks in one sector at once is an even more difficult task. Ocean Park Investments, led by Chief Investment Officer J. Dennis Jean-Jacques, has been able to do just that in the artificial intelligence space, even as he looks beyond chipmakers like Nvidia and Advanced Micro Devices, which has attracted a lot of attention. “We try to find value opportunities in areas where people and companies need and want them,” Jean-Jacques told CNBC in a phone interview, adding that he has been applying a value approach for 25 years. Using this strategy, he identified three big winners: Eaton, Vertiv, and Super Micro Computer. All three companies are taking advantage of the AI boom without competing directly with the chip giants. According to the investor, the two companies will instead likely play a key role in accelerating the transition to AI, while a third company, Super Micro Computer, will benefit from the relationship closely with Nvidia. ETN 1Y Mountain Eaton is profiting from the AI boom. “Eaton holds a dominant position in the electrification sector,” Jean-Jacques wrote in a newsletter issued to shareholders last week. The company focuses on building and maintaining the power grids needed for the increased power and data centers required by the growing AI industry. The International Energy Agency has predicted that energy demand from data centers, AI and cryptocurrency will double by 2026. Eaton’s share price has almost done that in the past 12 months . That’s when Ocean Park saw the value in the stock. But that’s not exactly a popular opinion. According to FactSet, 67% of analysts covering Eaton stock rate it a buy or overweight. On average, they have a price target of $324.51, implying an upside of about 3% from Tuesday’s close. VRT 1Y Mountain Vertiv specializes in infrastructure and cooling technology for the AI industry. At the same time the fund chose Eaton, Ocean Park also bought Vertiv. The company, headquartered just outside Columbus in Westerville, Ohio, also builds the power systems for data centers as well as the cooling equipment that allows servers and other high-tech manufacturing plants to operate efficiently. than. The stock is up more than 560% in the past year. Analysts surveyed by FactSet were overwhelmingly positive on the stock, with nearly all rating it a buy or overweight. The average price target of $89.06 implies an upside of more than 8% going forward. Mount SMCI 2023-07-14 This tech company is benefiting from its relationship with Nvida, located just across the street in San Jose, California. Super Micro’s gains over the past year are even more staggering. It’s Ocean Park’s biggest winner. Jean-Jacques started buying the stock in mid-summer 2023. It is up 717% since then. The stock is also the top performer in the S&P 500, with a 243% gain so far in 2024. It was elected to the index in March, replacing Whirlpool. Although Super Micro is involved in a number of high-tech sectors, its close relationship with Nvidia, which is headquartered just across the street in San Jose, California, has attracted the attention of Investors. The company is a key supplier to Nvidia that makes servers and other infrastructure, including server “clusters” used to train synthetic AI models. Wall Street also loves stocks. On Tuesday, Loop Capital analysts set a $1,500 target for Super Micro. In addition, JPMorgan officially started rating the stock with an “outperform rating” and a $1,150 price target – 25% higher than the stock’s current price. Having three stocks in your portfolio perform as well as Eaton, Vertiv and Super Micro could be a once-in-a-lifetime event. Jean-Jacques said the firm has about 40 long positions in its largest fund, the Ocean Park Omaha Allocation Fund. It aims to keep each investment at a 3% ceiling to avoid overinvestment in one sector. Overall, the fund gained 8.61% in the first quarter of 2024, compared with a 10.5% gain for the S&P. But Ocean Park Investments nearly tripled the HFRX Equity Hedge Fund Index during that same period. (There are various equity fees for Ocean Park investors, but the typical management fee is 1.5% according to the fund.) One of Jean-Jacques’s tests is “the search for operational efficiency.” ” in companies that may be able to increase profit margins. from 30% to 50%. He also seems to value management skills. Jean-Jacques has been a longtime investor in Honeywell, led by CEO Dave Cote. It was Cote’s role on the Vertex board that helped him decide to invest. Jean-Jacques also noted his ability to ask simple questions of those in the industry, saying that asking the right questions often leads to investment success.