With the broader stock markets in full-on rally mode since autumn 2023, investors may be wondering if now is a good time to do a bit of profit taking on some of their biggest winners. Undoubtedly, if the valuation still makes sense after a run, it doesn’t make a whole lot of sense to hit the sell button just because of the share price trajectory.
Of course, if the price of a stock has soared over what you think it’s worth (its intrinsic value), it can’t hurt to at least think about trimming a bit of froth off the top of your holding, especially if you’re a tad light on cash. And if you’ve doubled your money (or money) on last year’s hottest tech play?
Though it’s never a good idea to wait around for the market’s next correction, it’s always smart to have some dry powder on the sidelines, just in case the market starts to rumble again. Just because rates could be cut in a matter of months does not mean 2024 will be a smooth ride into the sunset.
Like it or not, it’s a U.S. election year, and the only thing that’s guaranteed is market volatility. As such, one may wish to better prepare themselves for any dips in the road between now and year’s end. Without further ado, here are two stocks that I view as getting a tad on the expensive side after more than a year of hot gains.
Shopify
Shopify (TSX:SHOP) stock looks quite pricy on the surface, with shares trading at $104 and change. Though the stock slipped 3.6% on Thursday’s upbeat session for tech, I don’t think investors ought to be hitting the panic button over a potential repeat of the plunge that happened in late 2021 and early 2022. Back then, Shopify stock was probably way overvalued. However, today, the stock looks just mildly overvalued, assuming there’s still a recession coming to Canada in 2024.
Of course, Shopify can be a difficult stock to evaluate at a time like this. On one hand, the firm is innovating and it has got more market share in the e-commerce scene (think smaller businesses) to capture. On the other hand, shares go for more than 15 times price-to-sales (P/S). And after a hot year-long run, a period of stagnant (or sideways) trading activity would not be out of the ordinary.
Shopify stock remains a great long-term growth story for young investors but at today’s prices? I’d prefer waiting for a better entry point. Perhaps the first half will see Mr. Market deal us just that!
Nvidia
Nvidia (NASDAQ:NVDA) is another hot stock that’s overdue for a cooldown, and in 2024, I wouldn’t be too surprised to see share momentum slow (or dissipate) as new leaders in the tech scene emerge. In any case, AI chips could stay hot as the firm readies its new hardware releases. For now, though, I don’t want to chase it. The stock could turn violently if Mr. Market deems it’s time for a market correction.
From a long-term perspective, I like the stock and its narrative. But if you’ve doubled up, it’s only wise to play with the house’s money, in my humble opinion. At $571 and change, NVDA stock has the potential to go either way. And it’ll probably do so in a hurry!
