Stocks are expensive right now, with the S&P 500 price-to-earnings ratio at its highest level since the dot-com bubble. That doesn’t mean that investors should be selling all their stocks and waiting for the next crash. It could be a while until a correction occurs, and that sort of strategy would have caused you to miss out on the past year of market growth.
Still, some shrewd investors have built more defensive portfolios and are waiting for a pull-back to scoop up great companies that happen to have aggressive valuations right now. These three stocks are great opportunities that you should consider if they get any cheaper.
Nvidia
Nvidia (NASDAQ:NVDA) is a rockstar tech stock with outstanding growth catalysts, and it’s returned more than 230% since the pandemic market bottom in March 2020.
Nvidia is the global market leader in PC graphics processor units (GPU), with 83% market share. The company supplies microchips that are essential for gaming, high-performance video, and other applications that require more advanced visual hardware. The global video game market is expected to grow more than 12% annually over the next five years, and high-resolution video content continues to become a preferred media for consumers. Those factors alone provide catalysts for Nvidia for the foreseeable future.
However, Nvidia’s opportunity isn’t limited to gaming and personal computing. The company’s chips have important applications in data centers, the automotive and autonomous vehicle industry, artificial intelligence and automation technology, and 5G network infrastructure. Connection to those trends provides an even more enticing growth opportunity.
What’s the catch here? Nvidia is expensive. Its forward price-to-earnings ratio of 55 is high relative to most other semiconductor stocks, and it’s substantially higher than Nvidia’s own recent historical levels. Even the PEG ratio, which takes into account the company’s bullish growth forecast, indicates an expensive-looking stock.
NVDA P/E Ratio (Forward 1y) data by YCharts
Overall, it seems that Nvidia is a great stock to own, but there might be less expensive alternatives that can deliver better fundamentals for the price. If there’s a market pull-back anytime soon, Nvidia should be one of the first stocks to consider at a lower price.
Image source: Getty Images.
Chipotle
Chipotle Mexican Grill (NYSE:CMG) is a chain of well-known, fast-casual restaurants. The company has managed to endure a handful of scandals and an unprecedented pandemic, and it just keeps on growing. The chain’s perceived value, nutrition, quality, and convenience clearly resonate with consumers. With double-digit growth forecast for this year and next, it doesn’t seem like there’s any reason to expect Chipotle to falter soon.
Chipotle has plenty of avenues for continued growth that excite investors. It has fewer than 2,900 locations, less than half of its sales are from…
Read More: 3 Stocks to Add to Your Portfolio in a Market Pull-Back