Nvidia requires no introduction. It’s one of the hottest stocks, if not the hottest, last year. And continue to do so this year. Its price skyrocketed by 239% last year, and almost doubled this year when it hit the height of $974 in March.
The current market correction has brought the price down by about 15% from its 52W high. Despite the correction, it’s still about 70% up year to date!
So why am I buying now?
In short, it is a punt. I am basically tempted by the drop in price.
It’s not that Nvidia has weak fundamentals but more of I don’t know much about the company and their products. Yes, I know who is Jensen Huang and I know Nvidia produces Graphic Processing Unit (GPU) and I know it just released its latest Blackwell platform. But all these are headline knowledge and I have not read up about them.
So my tiny purchase is simply based on my feel that I am paying a cheaper price for something that could potentially be very big. To put thing in context, its forward valuation isn’t really that expensive – forward PE is at 34x and forward PEG is at a reasonable 0.97.
This purchase is made possible due to my divestment of InMode recently. Based on valuation, it’s dirt cheap but I am getting a bit concern about how the Middle East tension will affect this Israel based company. Also, I am unsure if the recent weaker guidance will persist. Overall, I took a 45% loss in this investment.
Back to Nvidia, I am not totally new to the company. I had bought and sold it for a few occasions in the past when I was new and exploring the US market. A check on StocksCafe shows that I bought and sold the counter in early 2021, making a small loss.
At first look, the prices then did not seem that far away from current one. But that is because Nvidia did a 4-for-1 stock split in July 2021. So accounting for the split, my purchased price would be just $130!
While it might feel like a waste that I sold them then, there’s no regret. Given my understanding of the US market and the company then, I do not think I could have held on to the shares until now. A takeaway from this is that to have conviction and hold on to a company’s share, one needs to have some knowledge of the underlying business.
This tiny punt will give me the impetus to learn more about Nvidia, like what I am doing now – listening to GTC March 2024 Keynote with NVIDIA CEO Jensen Huang. Very technical but it does seem that they are at the frontier and working with many big partners Alphabet, Microsoft, Amazon, Meta and so on. It is also always nice to hear people who are pushing the limit and imagining the future in a positive way.
As for price, it might become cheaper in coming weeks and months. In fact, as I am typing this post, price has dropped by another 3% to $815. I am cool with that as I am prepare to buy a few more shares if price dropped by another 10-20%.