3 stocks I’m investing in now without batting an eyelid

This past week we got some important economic data from the US. The labor market there is surprisingly strong, inflation is relatively low, and some market participants had expected the budget deficit to be significantly higher. So the sentiment on Wall Street is pretty good right now. Not many would have predicted that a few days ago.

Against the background of this small wave of euphoria, I would now like to show you three stocks that look exciting.

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A top player in the semiconductor market

Nvidia (WKN: 918422) specializes in the development of graphics processors for the gaming and professional markets. Like its competitors, Nvidia has long suffered from supply chain problems.

The company downgraded its expectations for the second quarter of fiscal 2023 in the latest update. The share price also fell. However, currently at $187.09 (as of August 15, 2022), it is still 23% above the last low from early July.

The management around CEO Jensen Huang has to cope with various setbacks that affect the profit margin. For example, some GPUs now on sale sold for two to three times the manufacturer’s suggested retail price last year.

But if we foolishly put the current issues in the right time frame, we find that Nvidia’s balance sheet is one of the strongest in the industry. And that will help the company get through tough times.

Long-term outlook intact

Micron technology (WKN: 869020) is another of the major microchip companies in the United States. Management around CEO Sanjay Mehrotra recently lowered its forecasts. The reasons were weak demand and high inventories.

But in a long-term comparison, even this updated outlook is encouraging. Micron Technology expects long-term growth in DRAM modules to be around 15% and NAND flash memory around 28%.

I also like Micron Technology’s market position. With the current price-to-earnings ratio of 7.2, the stock looks very cheap. Looking at the cash flow potential, the price could go as high as $75 in the long term, I think.

Interesting shovel investment

ACM Research (WKN: A2H62F) is a supplier of wafer manufacturing equipment. The figures for the second quarter are better than many expected. In addition, the future prospects are very interesting.

In the last earnings call, management around CEO David Wang confirmed the full-year sales forecast of between US$365 million and US$405 million. The upper end of this range is even very likely. And should COVID restrictions in China ease in H2, ACM could increase shipments even more. It will help the company’s new products gain traction.

The balance sheet looks very solid. This means that even if the Corona crisis throws further obstacles between the company’s legs, the long-term prospects remain intact. What the management absolutely must work on, however, is return on capital. Here, ACM is clearly lagging behind its competitors. If you want to invest your money here, you should definitely keep an eye on the return on investment. In the long term, they are among the key indicators of a successful investment.

For now, though, ACM stock offers decent upside potential. The current price-earnings ratio of 26.9 is clearly too low in my opinion. Looking at the cash flow projections for the coming years, I put the stock’s fair value at around $30.

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Henning Lindhoff owns none of the shares mentioned. The Motley Fool owns shares of and recommends Nvidia.

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