Time to Add to these Two Techs: Facebook and NVIDIA

03/15/2019 5:00 am EST


Jim Powell

Principal Analyst, Global Changes & Opportunities

In my nearly 50 years in this industry, I have learned that the best place to look for promising situations is with stocks that we already own, asserts Jim Powell, editor of Global Changes & Opportunities Report.

Those stocks were investigated before they were purchased, and we have been following them closely, putting us in an excellent position to recognize when it is time to sell or buy more. With that in mind, here are two technology stocks that look particularly attractive at this time.

Facebook (FB) is performing almost exactly as I have been predicting for the past three months. The mass defections that pundits predicted would follow the disturbing revelations about the company’s privacy problems are clearly not occurring.

Most people who use social media appear to have few expectations that their personal information will be secure. Neither is anyone in Congress proposing legislation that would hurt the company’s business model that makes personal information available to advertisers.

On January 30, Facebook reported record 4th quarter profits of $2.38 a share, vs. $1.44 a year ago — a 65.3% leap. Sales jumped from $12.9 billion to $16.9 billion. Advertising revenues climbed from 86% of the company’s total to 93%.

Those numbers don’t suggest that Facebook is in trouble. Apparently, may investors agreed because the stock jumped 11.5% the day the numbers were announced.

Although Facebook appears to be in much better health than the media would like us to believe, the stock is likely to remain volatile. For investors who are willing to ride the rapids, I think Facebook will be very profitable.

Nvidia (NVDA) is a textbook fallen angel. After soaring to $300 last year, the company lost half its value due to concerns about declining cryptocurrency mining, falling game and artificial intelligence (AI) revenues, slowing growth in China, and the impact of the October stock market plunge.

The stock recently took another dive when management lowered its 4th quarter revenue projections. Even the hottest markets have slowdowns, and that includes the demand for Nvidia’s chip sets.

However, new technologies that make others possible almost always bounce back. That will surely be the case with Nvidia’s graphic cards for AI, driverless cars, “smart” surveillance systems, and dozens of other applications that are coming online. All of them require high-speed processors.

As for China, President Xi Jinping recently announced that his government will do whatever is necessary to make his country the world’s AI leader by 2025, which should be good news for Nvidia.

The stock market correction also appears to be coming to an end, although (as I mentioned earlier) it would not surprise me to see prices drop again before making a longer-term recovery.

That may also be true for Nvidia. There is no doubt that Nvidia has real problems. However, I think the stock is oversold and should perform well for aggressive long-term investors.

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