It’s been a tough past few months for Nvidia (NASDAQ: NVDA) and its investors. Despite being swept higher in Thursday’s broad bullishness, shares of the technology giant are still down by nearly half of their peak price hit in November. And the company just warned shareholders that revenue for the quarter now underway wouldn’t be as healthy as analysts were initially anticipating.
Veteran investors know, however, that some of the market’s biggest rewards come from buying shares of great companies while they’re beaten down. Nvidia is a great company. It’s just going through a rough patch.
Before stepping into a stake in this great company, though, take a step back and consider an alternative that may be a more appropriate pick for your particular portfolio.
Storm warning
If you’re reading this, then you likely already know Nvidia’s only anticipating a top line of $8.1 billion for the current quarter, versus analysts’ expectations of $8.4 billion. CFO Colette Kress explained during the first-quarter conference call that the company’s starting to see “softness in parts of Europe related to the war in the Ukraine and parts of China due to the COVID lockdowns.” She added that “the extent in which cryptocurrency mining contributed to Gaming demand is difficult for us to quantify with any reasonable degree of precision,” leaving investors further guessing as to what lies ahead.
Of course, none of this is exactly new stuff for investors to digest. Even with Thursday’s 6% gain, Nvidia shares are still only worth about half of what they were worth as of November, as these concerns have been priced into the stock’s value for weeks now.
The headwind created by the crisis in Ukraine, continued COVID-19 lockdowns, and the implosion of cryptocurrency prices, however, are all temporary problems, even if other investors don’t see it. That seemingly translates into opportunity. Like Baron Rothschild reportedly put it, “Buy when there’s blood in the streets.”
As is always the case, though, there’s more to the story.
Not even the pros do it very well, or for very long
In this case the “more” is a question about the rest of your holdings. Namely, is your portfolio already well-founded by a diversified index fund offering you all of the stock market’s upside, but also curbing the volatility that individual stocks bring to the table? It should be. Better yet, index funds also steer investors clear of the temptation to time individual entries and exits of stocks, since they’re simply a means of plugging into the market’s broad, long-term …….