The stock market has been incredibly good in 2024 and S&P 500 it is up 25% year to date. Fortunately for investors looking to put capital into the market, things cooled off in December, with the S&P down 1% since the start of the month. Looking even deeper, some companies are facing challenges that have dragged down their share prices.
Hoping for a drop in a stock’s 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 solid 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 work with the market, buying one or both stocks may end up being a wise decision.
If you opened a PDF file, you used the Adobe (NASDAQ: ADBE) product. While this ubiquitous file type may be Adobe’s best-known application, the company’s creative suite is the primary driver of financial results. Products like Photoshop and Premiere Pro are industry standards for creative fields, although competition has increased over time.
Proof of Adobe’s market position is visible in its financial results. Like all companies, there are sometimes short-term bumps in the road, but over the long term, Adobe has been incredibly consistent. Consider income, net income and free cash flow during the last five years.
While Adobe’s results are 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 perform within Adobe products can already be done using artificial intelligence, and the capabilities of artificial intelligence are increasing every day.
Adobe has decided to embrace this new technology and is working hard to incorporate its AI 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 smaller tasks, freeing up the creator to be creative.
Time will tell how successful this strategy will be, and the market seems to be waiting for it. Adobe currently trades for a price-to-earnings (P/E) ratio of 36. While that’s not a cheap multiple, it’s below Adobe’s five-year median P/E ratio of 47. For investors who believe Adobe will be able to harness the power of artificial intelligence, instead of if it bothers you, today’s price could turn out to be favorable.
Similar to Adobe, a Dutch manufacturer ASML (NASDAQ: ASML) is a leader in its industry. ASML manufactures 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 manufactures the ultraviolet lithography (EUV) machines required for these cutting-edge chips.
