These Popular Stocks Are Dropping: What To Buy Instead
Chipmaker stocks have been getting a lot of attention lately, driven by the massive hype surrounding the future of generative artificial intelligence. Their prices reflect that, especially Nvidia’s (NVDA), whose graphics processing units are particularly useful for AI applications. Nvidia is hardly the only company benefiting, though, as other chipmakers, like Advanced Micro Devices (AMD) and Taiwan Semiconductor Manufacturing (TSM), have seen benchmark-beating returns over the last five years.
Some of these stocks ran into headwinds, however, after China announced a policy last week that phases out the use of U.S.-based chipmaker products in its government servers and computers in an attempt to boost security for its government’s systems. Advanced Micro Devices and Intel (INTC) were hit hardest by the news, seeing declines in their stock prices over the past week.
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If you’re an investor in chipmakers and concerned for the future of your stock holdings — or if you were considering initiating an investment in them but are now having second thoughts — you’re probably wondering whether you have any better options. Pernas Research is an investment research company whose portfolio recommendations have outperformed the S&P 500 since inception in 2017, and Dean Pernas, co-founder of the company, shared three timely stock ideas.
Enphase (ENPH)
Founded in 2006, Enphase Energy designs, manufactures and sells residential solar photovoltaic systems both in the U.S. and abroad. In particular, it specializes in microinverters and battery systems that work with other manufacturers’ residential solar panels.
“In the solar industry, demand has been impacted by higher interest rates, as projects are typically financed. Nevertheless, taking a long-term perspective, the solar sector is still in its early stages. ENPH is a leader in the solar industry, due to its innovative microinverter technology,” Pernas said.
“Enphase has shipped over 70 million microinverters and deployed approximately 3.5 million Enphase-based systems in over 145 countries. The company vision is to transform every home into its own ‘power grid,’ capable of selling electricity to other homeowners as needed. This approach to a decentralized power grid could represent the future, providing a solution to alleviate the pressure on our aging electrical infrastructure,” Pernas explained.
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Burberry (BRBY)
Founded in 1856, Burberry is a luxury brand with a venerable history spanning over 168 years. Best known for its iconic trench coats and scarves, Burberry also makes and sells apparel, footwear, leather accessories and fragrances.
“Burberry … has experienced some design setbacks in recent years as it has strayed from its core differentiator — its British heritage. Fortunately, the resilience characteristic of luxury heritage brands enables them to withstand such challenges,” Pernas said.
“Burberry is currently engaged in an extensive seven-year transformation process aimed at elevating the brand and revitalizing its product offerings. Initiated by former CEO Marco Gobbetti in 2017, this strategic overhaul is being continued under the leadership of the current CEO, Jonathan Akeroyd. While the process of enhancing a brand’s position is not without risks, we are confident that Burberry’s rich heritage and strategic planning will enable it to persevere and thrive over time,” he continued.
Remitly (RELY)
Founded in 2011, Remitly is an online remittance service that offers money transfers to over 150 countries. A remittance is really any money sent to another party, but in this context, it typically refers to foreign workers sending money back to relatives or other loved ones in their home country.
“Remitly has experienced a recent decline due to management’s emphasis on heightened growth expenditures, despite market pressures to prioritize profitability. We maintain that this strategy is well-founded, as it positions Remitly to potentially emerge as the global leader in cross-border digital remittances. It continues to capture market share from traditional entities such as Western Union and MoneyGram, [and] the shift from cash-to-cash remittances to digital transactions presents a significant advantage,” Pernas said.
“Although the company has only recently begun to project positive cash flows, the economics of scaling digital remittances are favorable. Remitly’s advanced digital solutions, robust infrastructure and sophisticated fraud detection capabilities are anticipated to sustain its status as an industry leader, potentially doubling its market share within the next three to five years. We are optimistic about Remitly’s substantial growth potential,” he added.
Do Your Own Research
While relying on expert opinions can be a great way to source and research investment ideas, remember that you should never blindly trust a recommendation, regardless of the source. It’s important to understand what you’re investing in. If you’re not sure about investing in individual stocks, you can always consult a financial advisor or consider using passive investment strategies to own a widely diversified portfolio of stocks.
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