Financial markets often respond negatively to uncertainty, which can lead to consumers reducing their spending and businesses postponing capital investments until they can better predict future conditions. This volatility was evident on April 2 when the Trump administration announced a new tariff policy, causing significant declines in global equities.
The unpredictability of the Trump administration’s decisions, regardless of the feasibility of its plan to bring manufacturing jobs back to the United States, may cast a long-lasting shadow over the economy. Investors might consider shifting their focus from overpriced growth stocks to cheaper alternatives that pose less risk. Two companies that could serve as strong long-term investments are Super Micro Computer and Dollar Tree.
Super Micro Computer has faced a 63% drop in its share price over the past year, attributed not to recent events but to allegations of poor accounting practices. These allegations led to the resignation of its auditor and nearly resulted in Super Micro being delisted from the Nasdaq exchange in 2024. The company’s management has denied any wrongdoing, regained compliance with Nasdaq, and aimed to benefit from its solid fundamentals.
For the fiscal second quarter, Super Micro projects a 54% year-over-year sales increase to between $5.6 billion and $5.7 billion. The company’s collaboration with partners like Nvidia in developing AI chips into computer servers is expected to maintain its operational momentum. Despite concerns over past accounting issues, which were highlighted by Hindenburg Research, an independent committee review in December found no evidence of misconduct. The company has since appointed new financial executives to reinforce internal controls and market confidence.
Analysts at JP Morgan now predict a 60% likelihood of a U.S. recession in 2025, partly due to uncertainties surrounding trade policy, which can hinder business activity. Dollar Tree may prove to be a resilient investment during such times, thanks to its focus on low-cost, nondiscretionary consumer goods. Dollar Tree’s stock experienced a significant decline before the tariff announcement, but it has demonstrated resilience, falling only 4% since the beginning of the year compared to the S&P 500’s 10% drop.
Analysts are optimistic about Dollar Tree’s capacity to thrive amid uncertainty, with Citigroup noting that only half of Dollar Tree’s inventory is exposed to higher tariffs. Additionally, essential items like food may be less affected by price increases. In a challenging economy, Dollar Tree might attract higher-income customers from larger retailers such as Target or Kroger.
With a forward price-to-earnings ratio of just 13, Dollar Tree’s stock trades at a notable discount compared to the S&P 500’s average of 22. Both Dollar Tree and Super Micro Computer are seen as valuable options for investors seeking to mitigate risk in today’s uncertain economic environment.
Citigroup is affiliated with Motley Fool Money through advertising, and author Will Ebiefung holds a position in Super Micro Computer. The Motley Fool has stakes in and recommends Nvidia and Target, while also recommending Kroger. The company maintains a disclosure policy.
