✕

Markets

Insider Trading

Hedge Funds

Retirement

Opinion

10 High P/E Stocks Under the 200-Day SMA

Page 1 of 3

A high price-to-earnings ratio usually reflects substantial expectations for a company’s future earnings. But what happens when those expectations remain elevated even as the stock falls below its long-term trading average? That disconnect has become particularly relevant following the recent technology selloff, which has pressured several companies with strong growth prospects but demanding valuations.

The retreat has been especially visible in stocks exposed to artificial intelligence and semiconductor spending. Reuters reported on November 9 that a “month-long swoon” in technology and AI-related stocks in the week ended with the biggest one-day drop for the S&P 500 technology sector in more than six years.

The primary concern for investors is the Democratic victories in the midterm elections, which may lead to sluggish data-center spending, which makes up the center of the market rally. In other news, we compiled a list of the 10 Best Healthcare and Insurance Stocks To Buy Following the 2026 Democratic Midterm Sweep. Access the complete list here for free.

The 200-day simple moving average provides another perspective on these developments. By averaging a stock’s closing prices over approximately 200 trading sessions, the indicator helps investors assess its longer-term price trend. A stock trading below this level may be experiencing sustained selling pressure, although the technical signal alone says little about whether its underlying business is undervalued.

DON’T MISS: Forget the High-Beta Hype: 10 ‘Sleep Well at Night’ Stocks to Buy Now

This holds significance for investors when examining companies with elevated trailing P/E ratios. Some are established businesses generating substantial cash flow, while others have earnings that remain small relative to their market valuations. In both cases, a decline below the 200-day moving average does not necessarily make the stock inexpensive.

With this in mind, we examine 10 high-P/E stocks trading below their 200-day moving averages, focusing on the fundamentals that could help explain the gap between their valuations and recent share-price performance.

Methodology

To compile our list of the 10 High P/E Stocks Under the 200-Day SMA, we screened publicly traded companies to identify stocks trading below their 200-day simple moving averages. We then reviewed Yahoo Finance’s trailing price-to-earnings ratios, retaining companies with trailing P/E ratios of at least 30 or negative trailing earnings. The selected stocks were ranked in ascending order according to the number of hedge funds holding stakes in them, based on Insider Monkey’s hedge fund ownership data.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Insider Monkey’s quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has returned 612% since May 2014, beating its benchmark by 375 percentage points (see more details here).

10. Arm Holdings plc (NASDAQ:ARM)

Trailing P/E: 200.71

Number of Hedge Fund Holders: 52

Arm Holdings plc (NASDAQ:ARM) has built its semiconductor business around licensing processor technology and collecting royalties from chips using its designs. The company is now expanding into supplying its own designed silicon products, including the Arm AGI CPU, as it increases its exposure to data-center computing.

One important development is Arm’s expansion beyond its traditional intellectual property business into purpose-built silicon. In its second-quarter fiscal 2027 results, the company reported year-over-year revenue growth of 27% to $1.44 billion, with licensing and other revenue increasing 50% to $773 million. However, royalty revenue grew only 8%, illustrating the difference between securing new licensing agreements and generating revenue from chips subsequently shipped by customers. Also read our meticulously crafted list of the best stocks to retire on.

Arm’s data center business represents an important source of growth. Management reported that data center royalties doubled year over year, while planned customer commitments for its new Arm AGI CPU extend into 2027.

The company is also investing heavily in research and development to support its expanding technology portfolio. With a substantial valuation attached to its future earnings, the timing and profitability of new silicon products matter alongside continued licensing growth.

9. Eaton Corporation plc (NYSE:ETN)

Trailing P/E: 35.89

Number of Hedge Fund Holders: 68

The expansion of AI data centers has increased demand for electrical infrastructure, placing Eaton Corporation plc (NYSE:ETN) among the companies supplying essential equipment for increasingly power-intensive facilities. Its products serve data centers, utilities, industrial customers, and aerospace markets, making its business broader than the technology sector alone.

Eaton’s investment case is supported by the growing need to distribute and manage electricity reliably. In its third-quarter 2026 results, organic sales increased 19%, while its Electrical Americas business recorded a 39% increase in the twelve-month rolling average organic orders. Electrical Global orders increased 51% on the same basis, and 20% in Aerospace. Order dollars touched record levels in all three segments, which the company attributed to broad end-market strength.

READ ALSO: 10 Best AI-Powered Financial Stocks to Buy According to Analysts

These figures demonstrate strong customer demand, but the company’s ability to fulfill that demand efficiently remains equally important. Eaton has been expanding manufacturing capacity and announced an agreement to acquire COL Group to strengthen its European electrical distribution operations.

Despite continued investment in capacity, Eaton reported a record segment operating margin of 25.3% during the quarter, above the high end of guidance, with Electrical Americas margins also improving 230 basis points sequentially. The challenge for the company is maintaining that operating discipline while expanding production and integrating acquired businesses. Its elevated valuation places particular importance on converting strong orders into sustained sales and cash generation.

Page 1 of 3