It’s been a volatile 4-week stretch for the major market averages, with the Nasdaq-100 Index (QQQ) correcting by more than 8% and the S&P-500 (SPY) breaking one of its longest streaks in history without a 5% correction. Investors should use the dip to buy high-quality, tech stocks like Nvidia (NASDAQ:NVDA) and Adobe (NASDAQ:ADBE).It’s been a volatile 4-week stretch for the major market averages, with the Nasdaq-100 Index (QQQ) correcting by more than 8% and the S&P-500 (SPY) breaking one of its longest streaks in history without a 5% correction. The good news is that this correction has removed short-term overbought conditions on the market that were present in early September. The bad news is that we still haven’t seen any real semblance of fear in the market, and valuations still remain at some of their highest levels in history. This is evidenced by the S&P-500 trading at a price-to-sales ratio just shy of 3.20, a figure that is 22% above the Dotcom Bubble peak figure of ~2.60. However, with the market now in a short-term correction, it’s a great time to start building shopping lists in case the weakness persists and we do see some fear enter the market. In this update, we’ll look at two high-growth names which are beginning to pull back towards key support levels and dig into potential low-risk buy points:
(Source: TC2000.com)
Adobe (ADBE) and Nvidia (NVDA) have little in common as they hail from different industry groups, but they do share two key traits: they both have a track record of steady earnings growth with compound annual earnings growth rates above 35% since 2014, and they both continue to find strong support at their 40-week moving averages on any pullbacks. In ADBE’s case, the stock has a 40% compound annual EPS growth rate since FY2014 and just came off a strong quarter with 22% sales growth. In NVDA’s case, the stock has an incredible ~38% compound annual EPS growth rate for a mega-cap company and just had its second strongest quarter in the past two years from a sales growth standpoint, posting 68% revenue growth while lapping 50% growth in the year-ago period. Let’s take a closer look at both companies below: