The Motley Fool: Three underdog stocks set to outperform the market in 2H

Lee Samaha, a contributing stock market analyst at the Motley Fool, has named three underdog stocks that could outperform the market in the second half of the year. In the first half, they all retreated, but Samaha says the issues that led to their underperformance appear temporary, and their long-term growth prospects look "superb."

Shares of Hexcel, a company with a $4.8 billion market capitalization that produces materials for the aerospace industry, fell nearly 10% in the first half. Yet selling advanced graphite composite materials to Boeing, Airbus, and their subcontractors presents a promising business opportunity, Samaha writes. Hexcel is a supplier to electric vertical takeoff and landing (eVTOL) aircraft maker Archer Aviation and business jet manufacturer Embraer, as well, the Motley Fool article recalls.

The long-term outlook is excellent, Samaha believes, but in the near term, Hexcel "catches a cold when Airbus and Boeing start sneezing over supply chain issues that lower their production ramps."

Cognex, a leading maker of machine vision technology with a market capitalization of $6.87 billion, fell more than 11% in the first half. Its top line has been declining in recent years due to cyclical demand weakness amid high interest rates, explains Samaha.

He thinks machine vision's relevance will increase with the growing adoption of AI and deep learning, with Cognex set to achieve the management's aim of 10-11% annual organic growth through the cycle. 

In the second quarter, the company reported revenue growth of 4% year over year to $249 million, while in the third quarter, it guides for a 9% pickup.

EV manufacturer Tesla lost 21% of its market value in the first half of the year. The Motley Fool's Samaha notes that the company's difficulties are largely due to the removal of EV tax credits, as well as to increased EV market competition and high interest rates. Meanwhile, in June, Tesla started its robotaxi rollout, which Samaha argues is the key to the stock's investment case.

The release of an affordable Model Y, scheduled for the fourth quarter, will also support the stock. However, "be aware that any significant issue with the rollout is likely to hurt the stock," Samaha cautions.

This article was AI-translated and verified by a human editor