It may not seem like a very good time to be a new investor, with stocks back on the retreat going into pumpkin spice latté season. Indeed, things could go from bad to worse in October. That said, new investors should be hoping for markets to sag lower over time.
When that happens, bargains become more abundant, and your risks, though perceived as higher, are actually lower as multiples contract. You see, it’s far better to get a falling knife that’s trading at a discount to your estimate of intrinsic value than to “chase” the hot stock of the day — that was Nvidia (NASDAQ: NVDA) for quite some time — and run the risk of being left at the party once the punch bowl is taken away.
Right now, generative artificial intelligence (AI) is the place to be, and one may feel foolish (that’s a lower-case f) for not having any shares of Nvidia amid the so-called fourth industrial revolution. Though euphoria in everything touching AI has cooled ever so slightly in September, I don’t expect any sort of bubble burst anytime soon. Aside from a very small group of year-to-date AI winners, I actually think the basket has some value after the market’s latest slip off highs.
Is it too late to get into Nvidia stock?
I’m not so sure, but after rising more than 258% over the past year, I’m simply not comfortable putting new money to work here, especially TFSA (Tax-Free Savings Account) cash. Should the GPU (graphics processing unit) and AI chip giant come in a bit, I may reconsider. But for now, I think it’s a smart time to take some profit off the table. If you’ve tripled your money in a year, why not play with the house’s money at this point?
That way, you can still ride the AI wave without running the risk of losing all the gains in the event of a pullback. Personally, I’d take half (or more) of a position in Nvidia stock off, and rotate it into some of the corners of the TSX Index that’s richer with value.
Remember, value still matters, even if there’s no AI involved!
In this piece, we’ll check out two stocks I’d be willing to bet will outperform Nvidia by 2024’s end.
Canadian stock #1: Restaurant Brands International
Restaurant Brands International (TSX: QSR) is the legendary fast-food company behind such names as Burger King, Popeyes, and Tim Hortons. Recently, the stock corrected alongside the broader basket of quick-service restaurant plays.
The market has really punished many corners of the market, and for no real good reason, in my opinion. As QSR stock hovers at around $90 per share, I think it’s a good time to stash a few shares in your TFSA for the next three to five years. The dividend is at a fat 3.3%. And with a recent upgrade from Loop Capital over strength in Burger King, I find QSR stock to be incredibly timely.
Sure, you won’t double up in a few months like with Nvidia. However, you will likely be in for solid results, even in a recession year. My bold call? Restaurant Brands will outperform Nvidia between now and the end of 2024.
Canadian stock #2: Salesforce
Up next, we have enterprise software king in Salesforce (NYSE: CRM). The company has a big stake in the generative AI race, but shares don’t really seem to have the same heat as the likes of Nvidia. I think that’s a mistake on Mr. Market’s part. The stock is down 13.5% from its 52-week highs and could be headed for trouble if the rest of tech finishes the year lower.
That said, one has to think enterprise spend will increase next year after a year of cuts. Further, as Salesforce better integrates new AI technologies, the firm could be in for a couple of stellar quarters that could help power CRM stock much higher.
