The stock market has been unpredictable since the pandemic. The year 2022 was expected to be a year of recovery from the pandemic. But the Russia-Ukraine war disrupted the global supply chain and boosted inflation. Central banks worldwide had to change their course and increase the interest rate to a level that could curb demand and even slow the economy. Economists are divided on the 2023 outlook. Some fear a mild recession in the first half followed by a recovery in the second half. Some economists say Canada can avoid a recession.
When should you wait for a market crash?
The stock market plunged in December 2022 over fears of a recession but rose in January over anticipation of a slowdown in interest rates. Investors who kept waiting for a June 2022-like market crash missed the opportunity to ride the January rally. How can you avoid missing opportunities? Waiting for a market crash is no solution.
Never buy a stock near its 52-week high, unless the market has undervalued its growth, even at its 52-week high, like Bombardier. But you can buy a stock when it is slightly above its 52-week low but way below its 52-week high, and you believe it can cross its 52-week high.
If you have shortlisted a few stocks and read their risks and growth potential, you are aware of what conditions will drive the stock and what will pull it back. Here, I give you a sneak peek into the expectations and risks associated with certain stocks to help you invest in stocks responsibly.
Advanced Micro Devices (NASDAQ:AMD) stock surged almost 18% in January after falling more than 60% in the tech stock selloff of 2022. The company took a hit from weak PC demand, chip supply shortage, and the Ethereum merge that reduced the need for high computing graphic cards. But all these challenges are behind it now.
While weak PC sales could downplay AMD in 2023, strong server chip sales could drive the stock up. AMD’s data centre business could see growth from its five-nanometre (nm) Genoa server central processing units (CPU) and the upcoming five-nm Bergamo cloud-optimized CPU in the second half. Moreover, the Xilinx acquisition could complement AMD’s high computing roadmap. AMD still has less than a 25% share in the server chip market, which presents ample room to expand in the growing server market.
Now is a good time to buy AMD stock while it still trades 45% below its 52-week high. It could reach or even cross its 52-week high as the 5G infrastructure leads the way to the Internet of Things proliferation. You can buy this stock through your Tax-Free Savings Account (TFSA) and free your investment income from taxes.
Nuvei (TSX:NVEI) is another growth stock that has lost 80% of its value since October 2021, when e-commerce showed its first signs of weakness. The payments platform earns a commission on every transaction. Hence, it looks to boost volumes by helping businesses transact in more than 200 markets, 150 currencies, and more than 580 alternative payment methods. The company is expanding its reach to other verticals like cryptocurrency platforms, regulated sports betting, airlines, and other digital products.
Nuvei stock will grow when businesses and people transact more, which happens in a growing economy. Despite the crypto bubble burst and demand weakness from rising inflation, Nuvei’s third-quarter volumes surged 30%, and revenue surged 7%. Even if it was one of the slowest growth, it performed well, given the weak macro environment. It is among the few software stocks that are still profitable (third-quarter adjusted net income of $62.4 million).
Nuvei’s growth could remain tepid in the short term, as transactions slow but could boost in the mid-term, as the economy recovers. A small glimpse of what recovery looks like was visible in January when the stock surged more than 30%.
Now is a good time to buy the stock, as it trades near its initial public offering price of $46 — 53.5% below its 52-week high. If the stock can achieve its long-term growth target of 30% revenue growth and more than 50% operating margin, it could be in a long-term growth trend.