2 Stocks I’m Avoiding as Markets Hit All-Time Highs
On Friday, the S&P 500 closed above the 5,000 basis point level for the first time in history. Many large-cap tech stocks are hitting new all-time highs and the breadth between mega-caps and small-caps is growing by the day.
Even though I believe that we are in a strong bull market and all-time highs are a positive indicator, there are some stocks I’m willing to avoid after a recent surge. Here are 2 stocks I’m avoiding as markets continue to hit new all-time highs.
Arm Holdings plc (NASDAQ: ARM)
This one caught everyone off guard this week when it blew out earnings and rose by nearly 30% in extended trading. It was easily the best single trading session since Arm went public last year and also an indication of how hot semiconductor stocks are right now. Arm is no NVIDIA (NASDAQ: NVDA) and not even an AMD (NASDAQ: AMD). Yet after its earnings report the stock added more than $40 billion to its market cap overnight. This is a stock trading at a premium that isn’t going to improve anytime soon. On top of that, most of the shares of Arm are owned and locked up by the Japanese investment group Softbank. The IPO lockup period is set to expire on March 12th this year, so I think we can reasonably expect some selling pressure on the stock. I’m fine with buying stocks at all-time highs and I’m more than fine buying good semiconductor companies. Arm is just one stock I’ll avoid for the time being.
PayPal (NASDAQ: PYPL)
I might get slaughtered for this considering how popular PayPal is on social media. But the stock has been losing for more than two years now and even a new CEO and integration of AI couldn’t help the brand. This week, PayPal reported earnings and fell by about 10%. The company missed its guidance for 2024 and saw a 2% decline in active users last quarter. Part of me still wants to believe in PayPal because I use the product myself and I think it is an awesome way to send and receive funds. But now I just wonder if PayPal’s valuation is where it should be. Fintech stocks have been demolished over the past couple of years and maybe it’s just because companies like Visa (NYSE: V) and Mastercard (NYSE: MA) are innovating in the same ways. Given the choice between the two, it’s clear investors would prefer to buy shares of the blue-chip payment companies. I always have hope for PayPal, but at this point, I think it might just be time to cut losses and move on. I’m a fan of the product but I won’t be touching the stock for a while.
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