There's a lot to be said for delayed gratification -- and it's true in investing, too. For example, imagine you think the Progressive insurance company is terrific, with a golden future, and you're eager to be a shareholder. You might buy shares now -- but they seem overvalued, with their forward-looking price-to-earnings (P/E) ratio recently 25, well above the five-year average of 17. At such a level, there's a decent chance they'll drop closer to their intrinsic value instead of continuing to climb higher.
For best results, aim to buy into great companies at great -- or at least good -- prices. You might add Progressive to your watch list and wait for a better price. Here are three great performers you might also add to that watch list, waiting for a better entry point.
1. Apple
Apple (AAPL 0.64%), with a recent market value near $2.8 trillion, is an interesting beast. While many popular technology-heavy companies have seen their stocks plummet in the recent market downturn, Apple shares were recently only 5% off their 52-week high. The company's forward P/E was recently 27, well above its five-year average of 22, and suggesting that it's overvalued.
There's a decent case to be made to just buy the stock now, even if it's somewhat overvalued, because it appears to have a long runway of growth ahead of it. For example, it's still growing, despite its massive size -- in part due to regular introductions of new products, such as Apple Watches and Apple TV+. Apple's future offerings may well include cars and healthcare.
But if you think the stock, recently trading for around $173 per share, will be worth $300 per share in a few years, your gain will be greater if you can buy into it for, say, $140 instead of $173. Do your own thinking, though, as you should with all investment decisions, to arrive at your own thoughts on a given stock's value.
2. Axon Enterprise
Axon Enterprise (AXON 2.64%) is another very promising stock to consider for your portfolio, and to consider waiting on. You might know it by its former name, Taser. The company used to focus on weaponry, but it has since broadened its scope, embracing a range of law enforcement technology. That includes body cameras and monitoring software.
On Axon's website, it notes that it has saved 270,877 lives from death or serious injury, and that its offerings have been used more than five million times worldwide, 99.75% of the time resulting in no serious injury. The Axon Evidence platform, meanwhile, is hosting more than 109 petabytes of data.
If you keep up with news, you'll be aware that many are calling for police forces to use less force and to be more accountable, such as via body cameras. That bodes well for Axon's future. Another promising angle is that the company is looking to offer more for consumers, which can introduce a huge new market.
Axon's forward P/E was recently below its five-year average, suggesting that it's not wildly overvalued and may be reasonably valued. After digging into the company more, you might buy it at its recent price near $132 per share, or you might just add it to a watch list, waiting for a lower entry point. There's no guarantee the stock will fall much anytime soon, but a lower price can deliver larger eventual gains.
3. Costco
Then there's Costco (COST 1.01%), which needs little introduction. The warehouse retailer recently sported 834 warehouses, with 575 in the U.S. and Puerto Rico, 107 in Canada, 40 in Mexico, and dozens elsewhere. (Clearly, it has plenty of room to grow further.) Despite a recent market value topping $240 billion, Costco is still growing at a good clip, with third-quarter revenue up 16% year over year to more than $50 billion. It's become the third largest global retailer, with 300,000 employees worldwide.
Costco is facing pressures from inflation, which may lead to it raising prices, but it's not facing those pressures alone -- they also affect its peers and rivals. It has some advantages over many rivals, too, in its membership program that generates billions of dollars and that features a recent renewal rate of more than 92%, reflecting loyal customers. It's been pleasing customers with offerings from new brands, among other things -- such as Timberland, Banana Republic, iMac, and several major airlines, too.
Costco recently sported a forward-looking P/E of 37, above its five-year average of 33, so it seems far from undervalued. Consider adding it to your watch list -- it may see its shares pull back somewhat if inflationary or other pressures end up leading to disappointing results over the short term. And, of course, sometimes shares pull back temporarily for no good reason at all.
Give these companies a closer look if any of them interest you, and know that there are gobs of other strong and growing companies out there -- many of which are now undervalued due to the recent market downturn.
