At the moment, US-listed stocks account for also exactly half of my ISA holdings. To be precise, around 42% of my Stocks and Shares ISA is in cash — I’m a little wary at the moment — and 29% in both international (all North American) and UK-listed stocks.
So, why am I a little wary? Well, I’m being more selective about US stocks because the sharp rise in tariffs this year has fundamentally changed the investment landscape. Between January and April 2025, the average effective US tariff rate soared from 2.5% to 27%. These are levels not seen in over a century. It had settled slightly at 17.8% in May, but negotiations are ongoing. Such high tariffs are likely to be raising input costs, squeezing corporate profit margins, and dampening earnings growth.
Focusing in on the metrics
I’m focusing on the metrics because, in today’s environment, growth alone isn’t enough—valuations must be justifiable. With the S&P 500’s forward price-to-earnings (P/E) ratio at 21.3 — above both 5- and 10-year averages — it’s crucial to find companies where earnings multiples make sense relative to their growth prospects.
As always I’m prioritising growth-adjusted ratios like the P/E-to-growth (PEG) ratio, which help identify stocks offering genuine value for their expected growth, but being even more selective than usual.
So, who are they? Well, Pinterest (NYSE:PINS) stands out as fundamentally cheap by most metrics, while Alphabet (NASDAQ:GOOGL) trades at lower multiples than its peers despite similar growth trajectories. In my view, this makes both attractive, non-speculative picks in a market where speculation is increasingly risky.
A closer look at Pinterest
Pinterest currently trades at a forward P/E of 17.7 times and a PEG ratio of 0.53, reflecting strong expected earnings growth at a reasonable valuation.
The company’s AI-powered ad tools and a growing international user base have driven double-digit revenue growth, with Q1 2025 revenue up 16% year on year and global monthly active users reaching 570m.
Despite these strengths, Pinterest remains heavily dependent on digital advertising, making it sensitive to shifts in advertiser budgets and broader economic cycles.
It’s also very geographically reliant on North America for revenues, and this represents a risk as well as an opportunity. The region represents less than one-fifth of total users but nearly 80% of sales.
However, there’s plenty to be positive about. Al really seems to be a game changer, and has contributed to the company’s improving profitability and attractive growth profile.
A closer look at Alphabet
Alphabet trades at a forward P/E of 17.3 times. That’s above the communications sector median of 13.6 but about 30% below its own five-year average, signalling a more attractive entry point relative to its history.
The PEG ratio stands at 1.16, lower than the sector’s 1.43, indicating solid expected earnings growth for its valuation. I’d also add that Alphabet is more than just a communications stock, which makes its valuation so attractive.
Recent performance has been strong. In Q1 2025, Alphabet reported 12% revenue growth to $90.2bn, with Google Cloud up 28% and operating margin expanding to 34%.
Risks? There are always risks even with some of the largest companies in the world. One here is Alphabet potentially being forced to divest Chrome in an anti-trust trial.
However, for me, its wide economic moat and diversified growth engines underpin long-term appeal.
I’ve recently bought both these stocks.
