The global stocks presenting a once in a generation buying opportunity
Markets have been rough so far this year. The Dow Jones is on its worst losing streak since the Great Depression. Brent crude oil has been swimming above US$100/barrel since late February (with pretty much no reprieve since). On the macro front, inflation is at two-decade highs in Australia while producer prices in Germany recently hit a high not seen since the end of the Second World War.
But as Warren Buffett's been known to say - more than once during this market tumult - be fearful when others are greedy and greedy when others are fearful. But - Warren had not mentioned in his quote where you can afford to be greedy!
This takes me to a recent piece by Dan Ives at Wedbush Securities - famously one of Wall Street's most bullish analysts on all things Tesla. He recently wrote this about the selloff in US big tech stocks.
No one has a crystal ball, but we view this historic sell-off as more of a generational buying opportunity for the right tech names/winners in 2023 and 2024 rather than a time to throw in the towel on the tech sector with a piling on effect we are seeing take place on the street today.
In this wire, we'll take some inspiration from that quote and examine some of the stocks that fund managers are saying are presenting a "once in a generation" buying opportunity.
Mary Manning, Alphinity Investment Management
In her opinion, Mary's criteria for identifying a once-in-a-generation opportunity are three-fold.
- confidence that the business model will still be viable in a generation;
- confidence that the stock has moved out of an earnings downgrade cycle into an earnings upgrade cycle; and
- valuation support that signals a true buying opportunity, not an opportunity to catch a falling knife
With this in mind, Mary's choice for this wire involves a company with a durable business model, valuation support, and best of all, the potential for earnings upgrades.
ASML (NAS:ASML) "looks very attractive" with Mary adding there are structural tailwinds at its back which could lead to 50%+ gross margins in the years to come.
ASML management likes to talk about the three main drivers of their stock being structural, cyclical, and geopolitical. The combination of these drivers is very powerful and supports a strong long-term business case for ASML.
On valuation, Mary says a 30%+ correction from its late 2021 highs has been healthy. On a P/E basis, the company is now trading on 30x multiples (as supposed to 50x multiples). She adds that the company has the cash at the bank to protect its future.
"ASML’s valuation support is in sharp contrast to many of the unprofitable or barely profitable tech stocks with no valuation support even at these levels," Mary notes.
Kieran Moore, Munro Partners
It’s a rare thing indeed to have every industry in the world demanding your product.
Kieran summed up his pick - NVIDIA (NAS:NVDA) - in this one line. He says it has all the hallmarks of a decade-long winner that can provide all the components for the future of business.
"We think the semiconductor market is about to enter an artificial intelligence era, which under our estimates will double the size of the industry over the next 10 years," Kieran tells me.
But given semiconductors are a humongous megatrend and that there are so many worthy global competitors (TSMC, Micron, Intel to name a few), why would you back this particular name? Kieran says it's all about the complete package.
The reason to own in Nvidia is that it will provide the complete platform to enable the doubling of the semiconductor industry under the AI era. It is now one of the biggest companies in the world as people start to recognise this opportunity.
Lachlan Hughes, Swell Asset Management
The last pick in this trio is a name that every single person should know - Amazon (NAS:AMZN). In spite of a P/E valuation of over 50 and a slew of headwinds including supply chain difficulties and intense labour competition, Lachlan believes the issues will be transitory.
"Recent market volatility has created an opportunity to buy Amazon at a significant discount to its intrinsic value," Lachlan tells me.
But even that's not the jewel in the crown. Lachlan says the real secret is in its cloud business - a segment that could be worth US$1 trillion on its own.
"At today’s share price, its retail business, including the nascent digital advertising opportunity, represents a free option to investors," Lachlan says.
"We value Amazon’s global retail and advertising business at over $1.0 trillion, which means, together with AWS, our valuation exceeds $2.0 trillion, a material discount to its current $1.2 trillion dollar market capitalisation."
Following these global picks, we will be taking a look at a group of picks centred around opportunities on the ASX! If this piece is anything to go by, we will be looking at some cracking ideas from the smartest fund managers on the street.
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I'll be in charge of asking the questions to Australia's best strategists, economists, and fixed income fund managers. If you have questions of your own, flick us an email: email@example.com
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Hans is a content editor at Livewire. He edits the website's pre-market wrap "Charts and Caffeine", moderates the macro series "Signal or Noise", and leads Stats Incredible in the daily newsletter.