The stock market has done incredibly well in 2024 and the S&P 500 has increased 25% so far this year. Fortunately for investors looking to put capital into the market, things cooled down in December, with the S&P down 1% since the beginning of the month. If we look even deeper, some companies are facing challenges that have driven their stock prices down.
Waiting for a discount in the stock price is only part of the equation for finding the best stocks to buy. Investors should also look for companies with competitive advantages and a strong track record of success. Short-term challenges have created opportunities to buy shares of these two companies at a discount.
For investors with $1,000 to put to work in the market, buying one or both stocks could end up being a wise decision.
If you have opened a PDF file, you have used a Adobe (NASDAQ:ADBE) product. While this ubiquitous file type may be Adobe’s best-known application, it’s the company’s creative suite that is the main driver of financial results. Products like Photoshop and Premiere Pro are industry standards for creative fields, even as competition has increased over time.
Proof of Adobe’s position in the market is evident in its financial results. Like all companies, there are sometimes short-term bumps along the way, but in the long term, Adobe has been remarkably consistent. Consider revenue, net income, and free cash flow over the past five years.
While Adobe’s track record is impressive, the investment is about the future and the biggest potential disruption to Adobe’s market dominance is artificial intelligence (AI). Many of the tasks that creators would do within Adobe products can already be performed by AI, and the capabilities of AI are increasing every day.
Adobe has chosen to embrace this new technology and has been working hard to integrate its artificial intelligence product, Firefly, into its software suite. Rather than seeing AI as a replacement for Adobe products, the company believes it can be an assistant in the creative process by taking care of some of the more menial tasks, freeing up the creator to be creative.
Time will tell how successful this strategy will be and the market seems to be waiting to find out. Adobe is currently trading on a price-to-earnings (P/E) ratio of 36. While that is not a cheap multiple, it is below Adobe’s five-year average P/E ratio of 47. For investors who believe that Adobe will be able to harness the power of AI, rather than be disrupted by it, the current price could prove to be a bargain.
Like Adobe, the Dutch manufacturer ASML (NASDAQ: ASML) is a leader in its industry. ASML manufactures the lithography machines necessary to manufacture all semiconductor chips. When it comes to the most advanced semiconductors, ASML is the only company in the world that manufactures the extreme ultraviolet (EUV) lithography machines needed for those cutting-edge chips.