Market Selling Fears: Where To Invest $ 1,000 Right Now
Several red flags frightened investors on Monday, September 20, as the S&P 500 fell 1.7% amid signs of a potential selloff. September is generally considered a bad month for the stock market. The main indices such as the Dow Jones Industrial Average and the S&P 500 have historically declined in the month since 1950, although 2021 has proved particularly difficult due to an increase in coronavirus cases and problems in China, where the real estate giant Evergrande Group in China is on the verge of default.
The September sell-off could be bad news for short-term investors and traders. But investors who tend to hold stocks for a long time may find good opportunities to buy stocks at a discount. Let’s take a look at some of the ways that investors can take advantage of this month’s liquidation by investing $ 1,000 in potential winners that could yield rich long-term rewards.
A stock of semiconductors to buy
The world is facing a semiconductor shortage due to tremendous demand, which has exploded across several verticals such as smartphones, game consoles, personal computers, and automotive production. As a result, semiconductor foundries have ramped up their investment in chipmaking equipment, sparking impressive growth for ASML Holding (NASDAQ: ASML), which provides such equipment.
ASML Holding is an expensive stock with a price / earnings ratio of 63, and investors should be prepared to take any opportunity to buy it on the cheap. It is a fast-growing company poised to maintain its commercial momentum thanks to a massive end-market opportunity looming on the horizon.
It recorded 4 billion euros ($ 4.7 billion) in revenue in the second quarter of 2021, an increase of 21% from the period a year earlier. The diluted net profit of the company fell from 1.79 euros per share in the period of the previous year to 2.52 euros per share in the last quarter. Additionally, ASML has increased its forecast for the full year and now expects revenue growth of 35% in 2021, up from 30% previously.
Analysts predict that ASML will achieve annual profit growth of nearly 30% over the next five years, which is not surprising given the explosive increase in demand for its photolithography machines used in production. of chips. The global photolithography equipment market is expected to reach $ 29 billion in revenue by 2026.
ASML would control 62% of this market, while it holds a monopoly position in extreme ultraviolet (EUV) lithography systems. It should be noted that the EUV lithography market is expected to generate more than $ 13 billion in revenue by 2024, up from $ 2.16 billion in 2018. All of this indicates that ASML is designed for long-term growth. term, which makes it an ideal buy. downside candidate in the middle of the September liquidation.
Take advantage of the latest technology trends with these semiconductor games
A few other semiconductor stocks that have seen explosive demand for their chips have fallen in recent months. Synaptic (NASDAQ: SYNA) and Skyworks Solutions (NASDAQ: SWKS) are two of those stocks that fell from the single-digit average in September.
A withdrawal from Synaptics would give investors the opportunity to buy a rapidly growing company at a lower valuation. The stock is trading around 86 times sliding earnings today, compared to a trailing P / E of over 90 earlier this month. It makes sense to profit from a decline in Synaptics shares as the company has shifted into high gear.
The company, which supplies chips for the Internet of Things (IoT), personal computers and smartphones, reported 18% year-on-year revenue growth in the fourth quarter of fiscal 2021 to $ 328 million . Synaptics expects adjusted earnings of $ 2.60 per share this quarter, a 40% increase from the previous year. For the full year, the company is expected to post profit growth of 22% according to analysts’ estimates, and it will not be surprising to see it maintain this momentum over the long term due to the explosive growth it has achieved. she knows about the IoT market. .
IoT accounts for half of Synaptics’ revenue, and segment revenue grew 143% year-over-year in the previous quarter. For fiscal 2021, Synaptics had recorded 83% IoT revenue growth to $ 581 million, and it expects the rapid pace of segment increases to continue. It sees revenues from home automation, surveillance, video doorbells, wearable devices and fitness-related apps double over the next 18 months, while demand for its combined Wi-Fi and Bluetooth chipsets is also booming. boom.
Skyworks Solutions, on the other hand, looks like a steal right now, with stocks trading at 20 times earnings. The chipmaker’s revenue grew 52% year-on-year in the third quarter of fiscal 2021, while adjusted profit jumped 72% year-on-year to $ 2.15 per share. The company is now ready to put its foot on the gas with the launch of Apple‘s (NASDAQ: AAPL) iPhone 13 since the smartphone giant represents 56% of total turnover.
Apple equipped the latest iPhone with more 5G wireless bands, which is expected to lead to higher demand for Skyworks radio frequency (RF) filters used in iPhones. Unsurprisingly, Skyworks expects a 36% year-over-year increase in revenue in the current quarter to $ 1.3 billion, a trend that is expected to continue as Apple sales continue to grow. should take off.
Credit Suisse estimates that Apple iPhone sales could increase to 237 million units in 2022, down from 234 million this year and 249 million units in 2023. Skyworks thus appears poised for long-term growth through to the promising prospects of its biggest customer, making it a 5G stock to buy in a massive sell-off.
More growth stocks are trading at relatively cheaper levels
Twilio (NYSE: TWLO) and soft (NYSE: CHWY) are two other high growth companies that have taken a hit this month.
A $ 1,000 investment in Twilio five years ago is now worth $ 22,000. Past performance is not always indicative of future results, but I still think it would be a good idea to buy this stock on the downside, as it has the potential to become a multibagger again. The cloud communications specialist is quickly adding new customers and increasing customer spending.
The cloud communications space is growing at a compound annual growth rate of nearly 28% per year, according to Mordor Intelligence. And Twilio is growing faster than the industry it operates in, with second-quarter revenue up 67% year-over-year to $ 669 million. Investors can expect this to continue as the company is sitting on an addressable revenue opportunity worth $ 87 billion, which is far larger than the $ 2.25 billion in revenue on Last 12 months of the company.
Twilio is trading at 24.6 times sales compared to the over 31 average last year, and the drop gives investors the opportunity to buy this cloud stock at a relatively attractive valuation.
Chewy, on the other hand, fell significantly in September, as the chart above shows. This brought the share price-to-sell ratio down to 3.9 from 5.6 last year. But there was no slowdown in the growth of the online pet retailer, as second-quarter revenue rose 27% year-over-year to $ 2.16 billion. . The number of customers of the company soared to more than 20 million in the last quarter, an increase of 21% from the previous year.
Customer spending also increased with net sales per active customer 13.5% higher than last year at $ 404. These impressive growth trends appear to be here to stay, as spending on pets in the United States could reach $ 275 billion by 2030, from $ 118 billion in 2019, according to Morgan stanley. Chewy is in a position to take advantage of this, with a 41% share of the online pet products market. Additionally, the e-commerce channel is expected to account for 53% of the online pet products market by 2025, indicating that Chewy is sitting on a huge opportunity.
All of this makes Chewy one of the many growth stocks currently trading at an attractive valuation following the September sell-off. As such, savvy investors would do well to scour the stock market for more opportunities arising from a market correction and set up their portfolios for long term gains.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.