NVIDIA Corporation (NASDAQ:NVDA) has been taking it on the chin, as have a number of big-name chipmakers, for the past three months in particular. NVDA stock is down about 42% in the past three months, and about 30% for the past 12 months. But that differential in the short-term losses versus the longer term losses tells more a story about the markets than it does about NVDA.
I have been a fan of this maker of graphics processing units (GPUs) for a long time. But now my Portfolio Grader gives it an overall D grade.
There are two reasons. First, its D comes from its quantitative score. And given the momentum in the selling on the tech side of the market, this isn’t a surprise.
But the fact is, momentum selling can be broad based and not very stock specific. And once the momentum is going, it doesn’t stop easily, like piano rolling down a hill on a San Francisco street.
NVDA stock’s fundamental score is a B. That means the business underneath the stock is doing well.
As I have written here many times previously, there are few companies better positioned, both regarding its management and its technology, to be a significant part of most major growth sectors on the tech side of the economy.
Whether it’s cloud computing or driverless cars, or many things in between, NVDA is and will be a major player with enormous growth potential.
But here, Nvidia stock is in a market that is punishing the high-flying tech stocks that have had a very good run over the years.
For example, while NVDA stock is down 21% year-to-date, it’s up 385% in the past three years, including this awful year. That’s more than a 125% average annual gain in that time.
Why NVDA Stock Is Still a Winner
The second reason to hold this stock is NVDA’s GPUs aren’t really commodity-based goods. Many chip makers are really just competing on price with other chip makers, so margins are low and it’s all about volume.
NVDA delivers unique products that allow newer technologies to be exploited by consumers and professionals alike. Because of this, it can charge a premium for its products. And people are happy to pay the premiums.
For example, when cryptocurrencies became the rage last year around this time, it was Nvidia GPUs that all the serious currency miners used to look for more bitcoins or Ethereum, etc.
This cryptocurrency sector was a big boost for NVDA stock, although it wasn’t really a focus for the company. As crypto pricing crashed, traders punished NVDA stock, even though the company is doing well, all things considered.
The bottom line is, don’t let the market’s broad moves overwhelm you. If you have good stocks with good fundamentals, don’t panic. Quality long-term stocks like Nvidia stock deserve long-term commitment.
Wait for the storm to pass. Your patience will likely reward you handsomely.
— Louis Navellier
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Source: Investor Place