When it comes to stock picking, it pays to have a watchlist of stocks to buy. That’s what I do anyway, and when these companies reach an attractive entry point, that’s when I buy. This is particularly useful with growth stocks as they tend to demonstrate much more volatility than more matured companies.
So let’s take a closer look at a few companies from my list. One of these I’ve already bought, but remain on my watchlist as I may be looking to buy more.
Nvidia
Nvidia (NASDAQ:NVDA) has been on my radar for a while, but I’m yet to buy. The surging share price has been so pronounced this year that finding the right entry point has been challenging.
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The stock looks expensive on near-term valuation metrics, but the PEG ratio (price/earnings-to-growth) of 1.39 remains attractive — this ratio takes into account expected earnings growth over five years.
It’s also worth considering how far ahead Nvidia is versus its competition in the data centre/AI space. Nvidia’s data centre division registered $14.5bn in revenue in Q3 alone. Meanwhile, Intel and Advanced Micro Devices are forecasting data centre revenue of $1bn and $2bn respectively for 2024.
Of course, there are risks, including the impact of US sanctions on China and Nvidia’s reliance on Taiwan Semiconductor Manufacturing Company for production.
I’m still undecided whether this is the right entry point. The stock however, could continue to surge.
AppLovin
AppLovin (NASDAQ:APP) is a software company that helps its clients maximise advertising revenue. It operates in a growing industry and has experienced impressive revenue growth over the past 12 months — and its expected to continue.
One concern is the impact of forecasted recessions over the coming months on advertising demand. However, the most attractive thing about AppLovin is its expected growth over the medium term — the next three to five years.
While the stock’s forward price-to-earnings is an expensive 43 times, its PEG ratio is a phenomenally attractive 0.68. That suggests AppLovin’s growth potential is under appreciated.
I’ve recently added the stock to my portfolio, and I’ll be buying more.
Yalla Group
I’ve been reporting on Yalla (NYSE:YALA) for almost two years. Every time I covered the stock, it looked more appealing as net cash grew and its enterprise value fell to incredibly attractive levels.
However, it lacked momentum at the time, so I didn’t buy despite intending to do so on a number of occasions. Growth has also slowed since the pandemic as the company pivots towards mid-to-hard-core gaming.
Like many other investors, I’ve been waiting for evidence that its R&D spending is starting to pay off. There was some sign of this in Q3 when revenue came in above estimates at $85m, and up on previous quarters.
While the stock has pushed up in recent months, I’m still waiting for more evidence that the company can really grow into new sectors before I buy.
If it can, I think this is a hugely exciting investment opportunity. It’s been profitable since listing and now holds more than half its market value in cash.
