The stock market has done incredibly well in 2024 and the S&P500 is up 25% year to date. Fortunately for investors looking to put capital into the market, things have cooled in December, with the S&P down 1% since the start of the month. Looking even deeper, some companies are facing challenges that have caused their stock prices to plummet.
Hoping for a share price discount is only part of the equation in finding the best stocks to buy. Investors should also look for companies with competitive advantages and solid track records for success. Short-term challenges have created opportunities to buy shares in these two companies at a discount.
For investors with $1,000 to put to work in the market, buying one or both of these stocks could be a wise decision.
If you opened a PDF file, you will have a Adobe (NASDAQ: ADBE) product. While this ubiquitous file type is perhaps Adobe’s best-known application, it’s the company’s creative suite that is the main driver of its financial results. Products like Photoshop and Premiere Pro are industry standards for creative fields, even as competition has increased over time.
Evidence of Adobe’s market position is evident in its financial results. Like all companies, there are sometimes bumps in the road in the short term, but in the long term Adobe has been remarkably consistent. Think of turnover, net income and free cash flow in the past five years.
While Adobe’s track record is impressive, investments are about the future and the biggest potential disruption to Adobe’s market dominance is artificial intelligence (AI). Many of the tasks that creators would perform within Adobe’s products can already be produced by AI, and AI’s capabilities are expanding every day.
Adobe has chosen to embrace this new technology and has worked hard to integrate its AI product, Firefly, into its software suite. Rather than seeing AI as a replacement for Adobe’s products, the company believes it can be an assistant to the creative process by handling some of the more menial tasks, giving the creator the freedom to be creative.
Time will tell how successful this strategy will be, and the market seems to be waiting to find out. Adobe currently trades at a price-to-earnings (P/E) ratio of 36. While that’s not a cheap multiple, it is below Adobe’s five-year average P/E ratio of 47. For investors who believe Adobe will be able to Harnessing the power of AI, rather than being disrupted by it, today’s price could prove to be a bargain.
Just like Adobe, Dutch manufacturer ASML (NASDAQ: ASML) is the leader in its sector. ASML produces the lithography machines needed to make all semiconductor chips. When it comes to the most advanced semiconductors, ASML is the only company in the world that makes the extreme ultraviolet lithography (EUV) machines needed for those advanced chips.