The stock market has done incredibly well in 2024 and the S&P 500 has increased by 25% year to date. Fortunately for investors looking to put capital into the market, things have cooled in December, with the S&P down 1% since the start of the month. Looking even deeper, some companies are facing challenges that have driven down their stock prices.
Hoping for a drop in the share price is only part of the equation for finding the best stocks to buy. Investors should also be looking for companies with competitive advantages and a solid track record of success. Short-term challenges have created opportunities to buy shares in both these companies at a discount.
For investors with $1,000 to put to work in the market, buying one or both of these stocks could end up being a wise decision.
If you have opened a PDF file, you have used a file Adobe (NASDAQ: ADBE) product. While this ubiquitous file type may be Adobe's best-known application, the company's creative suite is the main driver of financial results. Products like Photoshop and Premiere Pro are industry standards for creative fields, even as competition increases over time.
Proof of Adobe's market position is evident in its financial results. Like all businesses, there are sometimes short-term bumps in the road, but in the long run, Adobe has been incredibly consistent. Considering revenue, net income, and free cash flow over the past five years.
While Adobe's track record is impressive, investing is about the future and the biggest potential disruption to Adobe's market dominance is artificial intelligence (AI). Many of the tasks that creators would do within Adobe products can already be generated by AI, and AI capabilities are increasing every day.
Adobe has chosen to embrace this new technology and has been working hard to incorporate its AI product, Firefly, into its software suite. Rather than seeing AI as a replacement for Adobe products, the company believes it can be an assistant to the creative process by taking care of some of the more menial tasks, freeing the creator to be creative.
Time will tell how successful this strategy will be, and it seems the market is waiting to find out. Adobe currently trades at a price-to-earnings (P/E) ratio of 36. While that's not a cheap multiple, it's lower than Adobe's five-year average P/E ratio of 47. For investors who believe Adobe will be able to harness the power of AI, rather than be disrupted by it, today's price could be a bargain.
Much like Adobe, a Dutch manufacturer ASML (NASDAQ: ASML) is the leader in its industry. ASML manufactures the lithography machines necessary to make all semiconductor chips. When it comes to the most advanced semiconductors, ASML is the only company in the world that makes the extreme ultraviolet (EUV) lithography machines necessary for those cutting-edge chips.