I’ve been stockpiling cash within my investment accounts lately to ensure I have the firepower to capitalise on stock market volatility. Last week however, I decided it was time to put a bit of this cash to work, so I invested £3,000 across a few different stocks.
Interested to know what shares I bought? Read on…
Big Tech bargain
The first stock I bought was Alphabet (NASDAQ: GOOG), the owner of Google and YouTube. It was already one of my largest holdings. Yet with the share price falling below $90 (down from $150 at the start of the year), I decided to buy more.
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Why did I buy more Alphabet stock? Well, put simply, I believe the company has enormous long-term growth potential. This is a company that operates in a number of high-growth industries including digital advertising, artificial intelligence, digital health, electronic payments, cloud computing, self-driving cars, and more. So I expect revenues and profits to grow significantly over the next decade.
Meanwhile, the stock is quite cheap. Currently, Alphabet has a P/E ratio of just 19.
There are a few risks here, of course. Lower spending from advertisers in the short term is probably the biggest. However, from a long-term investment perspective, I think there’s a lot to like about Alphabet.
FTSE 100 dividend stock
I also added to my holding in Smith & Nephew (LSE: SN). It’s a UK-listed healthcare company that specialises in orthopaedics, sports medicine, and advanced wound management.
One reason I added here is that the stock is a bit more on the ‘defensive’ side. Healthcare is one of the most defensive sectors. Given current economic conditions, I think it’s smart to have plenty of exposure to this sector right now.
Another reason is that there’s potential for solid earnings growth here. In the short term, the company could get a boost as China opens up and supply chain issues moderate. Meanwhile, in the long run, the company should get a boost from the world’s ageing population.
Now this stock could underperform if Covid-19 comes back with a vengeance. In this scenario, elective surgeries may be delayed again.
I’m comfortable with this risk however. And with a 3% dividend yield on offer, I’m getting paid to wait for profits, and the share price, to rise.
A UK growth stock
Finally, I added to UK-based power cords and cables company Volex (LSE: VLX) as well. This stock gives me something different. Volex is a very small company, with a current market-cap of just £420m.
Volex shares have taken a big hit this year and now trade on a P/E ratio of just 10. That seems too low to me. This is a company that has exposure to a number of growth markets, including the electric vehicle, data centre, and healthcare industries, and it is growing at a healthy rate. So I think there’s the potential for a significant rerating in the valuation at some stage.
Risks here include rising debt levels and excess inventory issues. Overall however, I like the risk/reward proposition at the stock’s current level.
