If you're in the market for some new stocks for your portfolio, you might be tempted to chase some high-flying growth stocks. That could work out well for you, but if the market suffers a setback, as it invariably does now and then, many overvalued growth stocks will tend to fall hardest.
So focus instead on stocks with more reasonable valuations. Here are a few to consider.
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1. Broadcom
Broadcom (AVGO 0.70%), a semiconductor giant with a recent market value of $1.9 trillion, certainly qualifies as a growth stock, as it has delivered average annual gains of 36% over the past 15 years. It's up 36% over the last year, but it still looks relatively undervalued or fairly valued, with a recent forward-looking price-to-earnings (P/E) ratio of 19.8, a bit below the five-year average of 20.7. (Its price-to-sales ratio of 24 is very much on the steep side, though.)
NASDAQ: AVGO
Key Data Points
That latter measure is a lofty valuation, but it can be justified by rapid growth. In the company's second quarter, reported in early June, revenue popped by 48% year over year, with net income rising more than 50%. More impressively, its semiconductor revenue from artificial intelligence (AI) surged 143%.
Broadcom is not just another semiconductor company -- it's also a software company, with offerings spanning wireless and wired technologies, cybersecurity, and storage, among other areas.
2. MercadoLibre
If you're worried about a looming pullback in the U.S. stock market, you might want to look abroad for some investments. So consider MercadoLibre (MELI 2.34%). It's a major e-commerce and fintech (financial technology) company serving Latin America and recently boasting 126 million unique buyers and 83 million monthly active users (up 29% year over year as of the first quarter). That quarter also featured revenue up 49% year over year and total payment volume up 50%.
NASDAQ: MELI
Key Data Points
It, too, has been quite a growth stock, averaging annual gains of nearly 29% over the past decade -- though it's down 27% over the past year (as of July 7). Its price-to-sales ratio was recently just 2.9, well below the five-year average of 5.3.
The bull case for MercadoLibre is that e-commerce is still in its early days in Latin America, leaving ample room for growth. The company is also diversified, with a marketplace and its fintech services that serve the underbanked with credit cards and more. MercadoLibre does have competition, but take a closer look at it to see if you think it's worth some of your hard-earned dollars.
3. Micron Technology
Memory chip specialist Micron Technology (MU +0.04%) is up 683% over the past year (as of July 7), and it still looks arguably reasonably valued, with a forward P/E ratio of 6.1. Its price-to-sales ratio is much steeper, at 12.43.
NASDAQ: MU
Key Data Points
The AI surge has driven demand for Micron's offerings, and that doesn't look like it's going to slow down soon. Its third quarter featured revenue up 345% and net income up about 1,400%. CEO Sanjay Mehrotra added: "Micron is investing at record levels in technology, products, and supply to address our customers' rapidly growing demand."
Give Micron a closer look, understanding that it's in a cyclical business and will likely be volatile.
