Generally speaking, I prefer to buy stocks when they are cheap and out of favour. The reason being that such stocks are definitionally overlooked and offer the promise of higher returns than stocks whose future growth is fully priced in. Nevertheless, there are some stocks that go up year after year yet never seem to run out of future growth opportunities. In this article, I will explore two soaring stocks I’d buy now without hesitation.
TSMC
Taiwan Semiconductor Manufacturing (NYSE:TSM), ‘TSMC’ for short, is a Taiwanese computer chipmaker. You may have heard of the wild and unprecedented success NVIDIA has had with its AI graphics cards (GPUs). TSMC is NVIDIA’s contract manufacturer – in other words, the company that actually builds and assembles said NVIDIA GPUs. So, Taiwan Semiconductor Manufacturing gets a piece of NVIDIA’s AI action, while being considerably cheaper. It even pays a bit of dividend income!
I’m putting my money where my mouth is with TSMC by saying I would buy it, as I have in fact bought it. In 2022, I heard that Warren Buffett had taken a position in TSMC. After doing a little research, I bought some shares of my own. Buffett sold his TSMC shares only a quarter after acquiring them, but I stuck with mine. I’ve been well rewarded so far.
What does TSMC have going for it?
First of all, it has a leading position in its market, with a 60% share in semiconductor manufacturing worldwide. If we’re talking exclusively about the world’s most advanced chips, then TSMC’s share rises to 90%.
Second, the stock is relatively cheap for an AI stock, trading at 26 times reported earnings. No, that’s not “cheap” in the common use of the term, but AI chip-making is an ultra-high growth sector with even more growth expected in the future. Indeed, 26 times earnings is cheap in a relative sense for this sub-sector. On the whole, I’m happy holding TSMC shares and would gladly buy more in the future.
EQB
EQB Inc (TSX:EQB) is a Canadian bank stock that trades at a mere nine times earnings despite incredible growth. Though I have not actually bought this stock, I would buy it without hesitation were I not satisfied with the investment ideas I’m already working with.
EQB is, like TSMC, a growth stock. In the last 12 months, it grew its revenue 14.5% and operating income 18%. For a financial, these are very high growth rates. Nevertheless, EQB Inc stock is quite cheap, trading at just 9 times earnings and 1.5 times book value. These multiples are lower than those of the TSX as a whole.
Over the years, many investors have done well buying EQB stock. I suspect they will continue doing well in the future.
Foolish takeaway
In soaring markets like the one we’re in now, it can feel tough to find things to buy. After all, nothing’s cheap! It’s true that North American markets are currently pricey by historical standards, but pockets of value can still be found. TSMC and EQB Inc demonstrate that fact in no uncertain terms.
