The recent global sell-off apparently came to a halt on Tuesday, and today I’m looking at growth stocks that have been hit pretty hard.
Markets fell over the past few days after US inflation data raised concerns that the US Federal Reserve would increase interest rates significantly.
This was also compounded by weak economic forecasts elsewhere in the world, including the UK and Germany.
Growth and tech stocks were among the hardest hit. But I see this as a good opportunity to buy, especially profit-making growth stocks.
So, here are two stocks I’m looking at for my portfolio.
Taiwan Semiconductor Manufacturing Company
Taiwan Semiconductor Manufacturing (NYSE:TSM) is the world’s largest chipmaker and is technologically some distance ahead of its competitors.
The falling share price comes despite TSMC registering record revenues in the first quarter of 2022. Soaring revenues reflect heightened demand, a backlog in supply of chips, and TSMC’s move to increase prices and shift towards higher margin products.
TSMC has grown in all but one of the last 15 quarters. Revenue has risen from $9.4bn in Q3 of 2019 to $17.1bn in Q1 of 2022. Gross profit has doubled in this period, which rose from $4.5bn in Q3 2019 to $9.5bn in Q1 2022.
TSMC is down 5% over the past week, but has a forward price-to-earnings ratio of 14.5. I think this represents excellent value for a company that is on such a significant growth curve.
The Taiwanese conglomerate is expecting its sales to grow by 25% to 29% this year. That’s a very attractive forecast. The group is also focusing on its most technologically advanced chips, and these are the ones that deliver higher margins.
One issue is geopolitical. Taiwan and TSMC produce a vast amount of the world’s semiconductors and this week, China reiterated its desire to unite the island nation with the mainland, by force. However, TSMC is diversifying out of Taiwan.
At today’s price, I’ll buy more for my portfolio.
NIO
Moving across the Taiwan Strait to Shanghai, I’m looking at buying more NIO (NYSE:NIO) stock. The EV maker is down nearly 16% over the past five days. That’s a considerable fall, but its not just US inflation data hurting the share price.
China imposed fresh restrictions last week as Covid started spreading again. The Shanghai lockdown in April hit NIO production hard. Investors are clearly worried that further restrictions will impact production.
NIO isn’t profit-making yet. In fact, it doesn’t anticipate making a profit until 2024. However, its revenue generation has been going from strength to strength and I think it’s got an offering that will challenge Tesla‘s superiority.
NIO looks particularly cheap compared to its US competitors when we look at the price-to-sales metric. It has a P/S ratio of 4.4. Tesla has a P/S ratio of 11.8.
I’m also a big fan of NIO’s swappable battery technology. Drivers can change their empty batteries for full batteries in a number of minutes at NIO garages. I think this gives it a huge advantage over its competitors.
I’ve already bought NIO stock but will buy more at the current price.
