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It’s better to be a top company in a hot field than a leader in a struggling industry. So investors should look for the best stocks in the best groups. Super micro computer (SMCI), li car (LI), Duolingo (DUOL), MongoDB (MDB) and Allegro MicroSystems (ALGM) are the top-rated stocks in the five strongest industry groups so far this year.

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SMCI stock is the No. 1 stock in the Computer-Hardware/Peripherals group, according to IBD Stock Checkup. that’s just over 95% through June 30. LI stocks, no Tesla (TSLA), is No. 1 in the Auto Manufacturers group, up 55.8% in 2023. DUOL stock tops the Computer Software-Education/Media group, which is up 54.5% this year increased. MDB stock leads the Computer Software-Database group, which is up 52.6% year-to-date. ALGM stock is No. 1 in Electronic-Semiconductor Faless which also includes Nvidia (NVDA). Fabless chipmakers are up 46.5% mid-year.

Top Industry Groups of 2023

Nvidia stock, Tesla and MongoDB are on IBD Leaderboard. Allegro MicroSystems and MDB stock are on the IBD 50. Tesla stock and MongoDB are on the IBD Big Cap 20

SMCI stock

Super Micro is the highest-rated stock in the computer hardware/peripherals group. And it’s not hard to see why. SMCI’s share will triple (203.6%) by 2023, including a 133.9% increase in the second quarter.

Earnings growth was tremendous, although it slowed to just 5% in the last quarter.

Super Micro shares broke out of a consolidation in February, though that would have been hard to sustain a few weeks later. SMCI shares then shot out of a messy six-week profit margin and continued to soar to a record high of 270.18 on June 9. to a Super Micro position.

Other top stocks in the group include Corsair gaming (CRSR), IonQ (IONQ), Dell Technologies (DELL) and logitech (LOGI).

Cathie Wood Stock is expected to deliver 772% EPS gains. It flashes a buy signal.

Li car stock

Li Auto is number 1 in the Automakers group. With EV sales booming, revenue and revenue growth is accelerating rapidly. LI shares are up 72.1% so far in 2023, including a 40.7% gain in the second quarter.

Equities tried to break out in late March and mid-April, but those moves immediately came to nothing. Finally, on May 10, Li Auto fell out of base on a hot earnings report. A few weeks later, LI stock offered another entry as it recovered from the 21-day line and cleared a brief consolidation.

Other top auto stocks include Ferrari (RACE), Ford engine (F), Tesla stock and Stellantis (STLA).

TSLA stock has skyrocketed 112.5% ​​in 2023, though Q2 earnings lagged Li Auto’s by 26.2%. Also, Tesla’s revenues fell year-on-year in the first quarter, while revenue growth slowed.

Duolingo stock

DUOL stock is No. 1 in the education/media software industry. The language learning platform doubled (101%) in 2013, but had risen only a fraction by 2023.

Duolingo is still losing money, but is expected to turn a profit later this year. Revenue growth is robust.

Duolingo shares rose at the start of 2023 and came out of a long consolidation in early March based on first-quarter numbers. Shares continued to run through March, then consolidated. DUOL shares plummeted in early May on AI fears, but then cleared that area based on Q2 earnings, as Duolingo touted how AI is a boon to its company. Shares reached a 52-week high of 168.40 on June 6. Duolingo stock subsequently retreated below the 50-day line, where it is currently experiencing resistance. A move above the 50-day and 21-day lines could offer early entry.

Duolingo uses AI to revolutionize learning, engage users and drive explosive growth

Other top stocks in Duolingo’s group include Coursera (COUR), Instruct (INST), Spotify (SPOT) and Udemy (UDMY).

MongoDB share

MDB stock is No. 1 in the Software Database group. MongoDB is up 108.8% in 2023, including a peak of 76.3% in the second quarter. Now consistently profitable, MongoDB has reported three consecutive quarters of triple-digit earnings growth.

MongoDB shares rose in January and then consolidated for three months before a breakout in early May. The shares then diverged in the fiscal Q1 earnings report. MDB stocks consolidated to form a three-week tight with elements of a high tight flag. Stocks just cleared that area, though MongoDB is still usable.

Other top database software manufacturers include Progress software (PRGS), Drop box (DBX), Splunk (SPLK) and Commvault Systems (CVLT).

Allegro Micro stock

Allegro Microsystems stock leads the semiconductor fabless group. Fabless chipmakers lack their own factories or “fabs.” They rent chip foundries like Taiwan semiconductor (TSM) to make their chips.

The ALGM share increased by 50.4% in 2023. Equities actually fell 5.9% in the second quarter, but rallied strongly in May and June. Allegro Micro’s earnings rose 76% in March’s fiscal fourth quarter, a three-quarter streak of accelerating earnings growth. Over the past five quarters, sales gains have accelerated.

Allegro Micro stock broke out in January, one of the early tech leaders in 2023. Shares rose to a record high of 48.72 on April 3, then sold hard and fell well below the 50-day mark. Stocks started bouncing in late April. On June 13, ALGM shares reclaimed the 50-day line. A few days later, ALGM broke a short-term high and broke a trendline, offering an early entry. Shares then paused amid the market’s pullback, but rallied again last week. Allegro now extends from that early entry, working its way up to 48.72 buys in a cup base, according to MarketSmith’s analysis.

Other top fabless chip stocks include Lattice semiconductor (LSCC), Rambus (RMBS), Monolithic energy systems (MPWR) and Nvidia stock.

AI plays 5 stocks near buy points

NVDA stock was the big-cap tech winner of 2023, rising 189.5% in 2023 and 52.3% in the second quarter. Nvidia now has a $1 trillion market cap. Stocks recovered from close to the 21-day line, breaking a brief downtrend, offering an aggressive entry.

Nvidia’s revenues have declined over the past four quarters, a major reason why NVDA stocks are not number 1 in their group. But investors expect Nvidia’s earnings per share to more than double in the current fiscal year, thanks to the company’s excellent guidance as the chipmaker leads the AI ​​boom.

Remember, investors should never buy based on ratings alone. They are a useful screening tool, but purchasing decisions should be made with an eye to the action on the chart, market conditions and much more.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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