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Is Nvidia a Buy Despite Its High Valuation?

By Rachel Warren, Travis Hoium, and Connor Allen – Dec 20, 2021 at 7:30AM

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These investors think it's worth watching.

If Nvidia's (NVDA -2.52%) high valuation has kept you from investing in the chipmaker, you're not alone. In this segment of Backstage Pass, recorded on Nov. 17, Fool contributors Rachel Warren, Connor Allen, and Travis Hoium discuss a couple of ways you can watch stocks you're interested in.

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Rachel Warren: We have a few other questions we will get to before we move onto our next question. Mr. Sharma, I don't want to mispronounce your first name says, "What do you think of Nvidia's valuation for a new investor to buy stock?" Following up on that discussion, do either of you have thoughts on Nvidia's currently high-valuation? Looks like it's about a 100 times trailing earnings, last I checked?

Connor Allen: I think it went up to $730 billion market cap today. Obviously they are valued pretty high. But a lot of great companies are valued very high for a very long time. That's something that I try to think about when I'm investing in companies. If I didn't own Nvidia for the past two, three years, would I be opening a new position now? I don't know. It would be tough, so I understand where you're coming from Mr. Sharma. I totally get that concern that you have.

But I do want to say one thing that I might do if I were you, is and this is something that I've done in the past, is just open up a small position and that will remind you to buy. If there's any dips in the future, it will be in your portfolio, and you will see it, and you'll be like, OK, it's down.

You might get that notification on your phone, that it's down 5% to 6% where you're like, OK. Well, let me go add to this company that I want to own, I just don't want to pay this price for.

Travis Hoium: I would agree with that. The other tool that I found to be really helpful over time is CAPS, so When I have ideas, I'll just put them in there. Like Connor was saying, you can keep an eye on, did this drop? Does that make it more interesting? Did it go up?

Does that make it more interesting for me? There's two ways to look at it there but keeps it on your radar and on your watch list. Those are, I think, buying a little a small position or keeping it in a system like CAPS is both really great options.

Connor Allen: Dollar-cost averaging too. You could also dollar-cost average, that would be great.

Rachel Warren: Yeah. I like Nvidia, I think it's a great company. 

Connor Allen owns Nvidia. Rachel Warren has no position in any of the stocks mentioned. Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nvidia. The Motley Fool has a disclosure policy.

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