Happy Sunday to everyone on The Street. 

Gordon Haskett’s Consumer Macro Sentiment Index just hit a 15-month high in September. People appear to be feeling happier thanks to Jerome Powell. No, not really, but the larger-than-expected rate cut didn’t hurt.

There was more optimism around the stock market, job availability, business conditions, and income. The index climbed to 93.3, making it the first time it’s passed its long-term average since February according to managing director Chuck Grom.

But not everything's rosy—job security was the only area that saw a dip. Does this data check out? How are you feeling heading into the end of the year?

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Q4 Could Be Beneficial for These Kinds of Stocks

Tailwinds

So far, October hasn’t been great for the market. However, according to Bespoke Investment Group, certain stocks could rise to the occasion anyway. According to the firm, the last quarter is historically the best quarter for dividend-paying stocks.

The investment group compiled a list of 30 S&P 500 stocks that pay dividends with averaged gains of 11.5% over the past 10 fourth quarters. These stocks are expected to benefit from seasonality and Fed rate cuts, which should make dividend yields more attractive juxtaposed with falling Treasury yields.

Tapestry

Tapestry (TPR) was up first on the list. The fashion company has averaged a 17% return over the last 10 years in Q4. Tapestry’s year-to-date total return (accounting for dividends) is up over 28%, with its dividend yielding 3%.

But don’t just take Bespoke’s word for it: JPMorgan (JPM) analyst Matthew Boss has given the stock an overweight rating, saying it has “global momentum.” Boss is predicting both revenue and gross margin growth next year.

KeyCorp

Bespoke is also bullish on KeyCorp (KEY). The stock has returned 15% in Q4 over the last decade with a total return of 21% YTD. Its dividend yield sits at 5%.

Piper Sandler analyst R. Scott Siefers likes the stock and recently raised his 12-month price target to $19 per share. He expects the company’s net interest income to continue to improve.

With a history of impressive performance during the home stretch of the year, these stocks could provide investors with a unique opportunity.

Necessary disclaimer: Past performance is not a guarantee of future results.

Addressing Two Illnesses With One Drug

Revisiting an Old Drug

Bristol-Myers Squibb’s (BMY) new drug, Cobenfy, was originally developed in the 1990s to treat Alzheimer's. However, it was abandoned due to its severe side effects.

Now it’s been repurposed as a treatment for schizophrenia with a new FDA approval. That makes it the first new antipsychotic drug to hit the market in years.

Last year Bristol-Myers acquired Karuna, the biopharmaceutical company manufacturing Cobenfy, for $14 billion.

Dual Purposes

Cobenfy is now designed to help schizophrenia patients, but it could return to its roots of easing Alzheimer’s. BMY is currently attempting to use Cobenfy to treat psychotic symptoms in Alzheimer’s patients, with clinical results expected in 2026. This has investors excited about the stock as the market for Alzheimer’s treatment grows.

Analysts are projecting Cobenfy to bring in $4 billion in annual sales in the next decade, and a large portion of that could come from Alzheimer’s patients.

Bristol-Myers stock has risen more than 8% in the last month in response to its innovative drug.

Market Potential

Analysts believe that, while the drug’s use as a treatment for schizophrenia is promising, its potential with Alzheimer’s patients is even greater. One analyst even predicts that it could bring in $3.9 billion annually in Alzheimer’s sales down the road.

BMY hopes that Cobenfy will be able to replicate its promising effects from the 90s without the severe side effects that originally plagued its development.

The results of the clinical trials will be highly anticipated, and if BMY gets the results it hopes for, its stock could benefit in a big way.

Is SMCI a Buy?

A Rollercoaster Year

The AI revolution has driven massive gains for many tech stocks, and Super Micro Computer (SMCI) is no different. Its stock is up over 65% YTD, but analysts think it still has around 76% upside from its current price.

Despite massive growth in the past several years, the stock is down around 51% over the last three months due to a recent Hindenburg Research report and a postponed annual SEC filing.

Is this recent turn of events a bad omen for the stock or just a bump along the road?

Demand is High

SMCI manufactures customized, high-performance computing solutions to an array of customers from cloud computing to data centers. Its products are in high demand – and that demand is expected to continue growing alongside the adoption of AI.

Super Micro’s most recent quarterly report was nothing to scoff at – revenue was up 76.6% to $3.85 billion and adjusted EPS hit $6.25 year-over-year, a 78% gain.

Gross margin did fall from 17% to 11.2% year-over-year, but SMCI management expects gross and operating margins to rise in FY 2025.

Analyst Outlooks

Loop Capital Markets analyst Ananda Baruah has given the stock a buy rating with a price target of $100. Of the 14 analysts covering the stock, four give it a “strong buy” rating. Only one has labeled it a “sell.” Its average price target sits at $72.92.

SMCI’s recent drop in price shows that investors are concerned about the Hindenburg report, but some analysts believe this could be a short-term concern.

For investors wanting to gain exposure to the long-term growth potential of AI, the recent selloff could present a solid entry point.

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Last Week’s Poll Results

Are you bullish or bearish on Tesla (TSLA) over the next 12 months?

🟨🟨🟨⬜️⬜️⬜️ 🐂 Bullish

🟩🟩🟩🟩🟩🟩 🐻 Bearish

Which stock do you think will outperform over the next 12 months?

🟨🟨⬜️⬜️⬜️⬜️ DraftKings (DKNG) (12)

🟩🟩🟩🟩🟩🟩 Viking Therapeutics (VKTX)

Are you bullish or bearish on Home Depot over the next 12 months?

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨⬜️⬜️⬜️⬜️⬜️ 🐻 Bearish