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Lately, I’ve been hoarding cash in my investment accounts to ensure I have the firepower to take advantage of stock market volatility. Last week, however, I decided it was time to put some of that money to work, so I invested £3,000 in a few different stocks.
Want to know what stocks I bought? Continue reading…
Good deal Big Tech
The first stock I bought was Alphabet (NASDAQ:GOOG), the owner of Google and YouTube. It was already one of my biggest holdings. Still, with the stock price falling below $90 (from $150 at the start of the year), I decided to buy more.
Why did I buy more Alphabet shares? Well, simply put, I believe the company has tremendous potential for long-term growth. It 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, etc. . So I expect revenues and profits to grow significantly over the next decade.
Meanwhile, the stock is pretty cheap. Currently, Alphabet has a P/E ratio of just 19.
There are some risks here, of course. The drop in advertiser spending in the short term is probably the most significant. However, from a long-term investment perspective, I think there’s a lot to like about Alphabet.
FTSE 100 dividend share
I also added to my participation in Blacksmith and nephew (LSE: SN). It is a UK-listed healthcare company specializing in orthopaedics, sports medicine and advanced wound management.
One of the reasons I added here is that the stock is a bit more on the “defensive” side. Healthcare is one of the most defensive sectors. Given the current economic conditions, I think it makes sense to have a lot of exposure to this sector at this time.
Another reason is that there is solid earnings growth potential here. In the short term, the company could get a boost as China opens up and supply chain issues ease. Meanwhile, in the long term, business should be boosted by the aging of the world’s population.
Now, this stock could underperform if Covid-19 returns with a vengeance. In this scenario, elective surgeries may be delayed again.
I’m comfortable with that risk though. And with a 3% dividend yield, I get paid to wait for earnings and the stock price to rise.
A British growth stock
Finally I added to the UK company of power cords and cables Volex (LSE: VLX) as well. This stock gives me something different. Volex is a very small company, with a current market capitalization of just £420m.
Volex shares have taken a hit this year and are now trading 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 growing markets, including the electric vehicle, data center and healthcare sectors, and it is growing at a healthy pace. So I think there is potential for a significant revaluation in valuation at some point.
Risks here include rising debt levels and issues with excess inventory. Overall, though, I like the risk/reward proposition at the stock’s current level.