The best stocks to invest $1000 in right now

The stock market has done incredibly well in 2024. and S&P 500 is up 25% year to date. Fortunately for investors looking to put capital into the market, things cooled off in December, with the S&P down 1% since the start of the month. Looking even deeper, some companies are facing challenges that have depressed their stock prices.

Hoping for a discount in the stock price is only part of the equation for finding the best stocks to buy. Investors should also look for companies with competitive advantages and solid track records. Short-term challenges have created opportunities to buy shares in these two companies at a discount.

For investors with $1,000 to put into the market, buying one or both of these stocks could prove to be a wise move.

If you opened a PDF file, you used Adobe (NASDAQ: ADBE) product. While this ubiquitous file type may be Adobe’s best-known application, it’s the company’s creative suite that’s the main driver of its financial results. Products like Photoshop and Premiere Pro are industry standards for creative fields, although competition has increased over time.

Evidence of Adobe’s market position is evident in the financial results. Like any business, there are occasional short-term bumps in the road, but over the long term Adobe has been remarkably consistent. Consider revenue, net income and free cash flow in the last five years.

While Adobe’s track record is impressive, investing is all 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 now be produced by AI, and the capabilities of AI are increasing every day.

Adobe chose to embrace this new technology and worked hard to build 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, taking care of some of the more mundane tasks, freeing up the creator to be creative.

Time will tell how successful this strategy will be, and the market seems to be waiting to find out. Adobe currently trades for a price-to-earnings (P/E) ratio of 36. While that’s not cheap multiple times, it’s below Adobe’s five-year average P/E ratio of 47. For investors who believe Adobe will be able to harness the power of AI instead of being disturbed by it, today’s price can prove advantageous.

Like Adobe, a Dutch manufacturer ASML (NASDAQ: ASML) is a leader in its industry. ASML manufactures the lithography machines needed to produce all semiconductor chips. When it comes to cutting-edge semiconductors, ASML is the only company in the world that manufactures the extreme ultraviolet lithography (EUV) machines required for these cutting-edge chips.

The story continues

With that kind of competitive advantage, one would expect ASML to trade for a very rich valuation, and it usually does. However, the cyclical focus of the semiconductor industry (AI chips notwithstanding), combined with geopolitical restrictions on where advanced semiconductors can be sold, has cast more uncertainty on the business than is typical. This has resulted in ASML trading at almost the same discount to its five-year average P/E ratio as Adobe.

ASML PE ratio data from YCharts

ASML’s management believes the challenges it faces will continue until 2025 before a recovery is seen. While this could mean further declines in the stock, ASML’s discount right now represents a compelling buying opportunity for a company that will be at the center of one of the most important industries for years to come.

ASML expects total semiconductor sales to grow at a 9% compound annual growth rate between 2025 and 2025. and 2030, providing some insight into the demand waiting on the other side of this cyclical downturn. Perhaps more importantly, the company believes that sales of semiconductors for servers, data centers and storage will be twice that of total sales.

This should mean that there will be continued demand for ASML’s state-of-the-art EUV machines, as this is where AI spending should be concentrated.

Before you buy shares in ASML, consider this:

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Jeff Santoro holds positions at ASML and Adobe. The Motley Fool has positions and recommends ASML and Adobe. The Motley Fool has a disclosure policy.

The best stocks to invest $1000 in right now was originally published by The Motley Fool