Admit when I’m wrong

Buffett invested in the Dexter Shoe Company back the 1990s, paying for it with $443m worth of Berkshire Hathaway stock. The business collapsed under competition, making it a near-total loss. Even though Buffett couldn’t have predicted such a bad outcome, there’s the argument that he could have sold his holding earlier on to avoid such a heavy loss.

Maybe he thought the company would turn around, despite various red flags along the way. Even though I’m a long-term investor, I have to admit that sometimes my view is wrong. Eating humble pie and selling a stock isn’t something I recommend often, but there are certain occasions when I think a stock could fall even further, and it saves me money by cutting the holding and allocating it to another company instead.

Don’t let emotions drive decisions

This relates to Buffett’s purchase of Berkshire Hathaway itself. Initially just a struggling textile business, Buffett admitted he bought it out of spite and sentimentality, not because it was a great investment. The textile side lost money for years before he pivoted Berkshire into insurance and investments.

The lesson for me is to be careful when thinking about buying a company purely out of FOMO (the fear of missing out), or based on some emotion. For example, just because a stock has risen sharply in value in the short term doesn’t guarantee it’s going to keep going.

Waiting too long to act

Procrastination’s a big one I think impacts us all! Buffett admits he missed big opportunities like Google and Amazon early on, despite understanding their potential from Berkshire’s own use of Google ads and Amazon’s retail model.

That’s why I’m thinking about buying MongoDB (NASDAQ:MDB). It’s a company that builds and manages databases. Yet it stores the information in a high-tech way, meaning that it’s easier for developers to build modern applications, especially those handling big data, artificial intelligence (AI) workloads and real-time analytics.

Put another way, some people think it’s tapping into a vast potential market. Global data’s doubling every two years, and companies need scalable, flexible databases. MongoDB’s architecture is built for this environment. AI processes need high-performance databases, and AI as a target market’s not only huge, but growing.

I like the business model, as customers pay on a subscription- and usage-based model. This provides reliable cash flow and makes it easier to forecast future revenue. The stock’s down 11% over the past year. One factor in this was disappointing guidance following financial results earlier this year. Even though the forecasts were still positive, investors set a high bar for the pace of growth being expected. This remains a risk going forward.

I’m seriously thinking about buying the stock soon, to avoid the potential mistake of missing out on what could be a great long-term opportunity.

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In these instances, it’s sometimes possible to uncover a golden opportunity to secure long-term returns.

Does such an opportunity exist in major US tech stock MongoDB (NASDAQ: MDB), which is down 40% over the past 12 months?

Let’s take a look.

The volatile tech market

Like many other US firms developing groundbreaking new technology, MongoDB’s share price has seen some serious volatility. It initially grabbed the attention of top investors with its NoSQL database tech, which offers a better way to store huge amounts of data. This is a key requirement when it comes to artificial intelligence (AI), so the attention is warranted. 

In its short (17-year) lifespan, it has managed to amass a $16.8bn market cap. During the tech boom before Covid, its share price climbed 1,800% from a mere $28 to almost $570. 

However, the initial wave of enthusiasm ran dry toward the end of 2021 and things took a downward turn. When the tech market suffered a heavy blow in 2022, MongoDB had 70% of its value wiped off its share price. 

By that point, however, it was already established, with over 40,000 customers worldwide. Some of its better-known clients include Novo Nordisk, Forbes, and Vodafone. This may be one reason it easily recovered from the dip, regaining the $400 price level in mid-2023.

Managing expectations

Despite the strong recovery, MongoDB suffered further losses in April when it released its most recent earnings report. 

Even though revenue and profits beat expectations, investors were spooked by a more pressing revelation. The company’s management announced a significant reduction in its full-year guidance, fearing that growth in the sector is slowing down.

One reason could be a reversal in US rate cut expectations. The Federal Reserve initially set a target of reducing inflation to 2% by mid-year. But rather than falling, it has risen to 3.4%. So businesses are understandably tightening their belts, particularly when it comes to investing in new and expensive technology.

An opportunity?

MongoDB’s leadership is likely attempting to manage investor expectations by pre-empting further economic shocks this year. On the plus side, if inflation drops more quickly than expected, the company comes out looking even better for its efforts. It’s still unclear when (or if) interest rates will be cut this year. But if they are, the renewed fight for AI superiority could send a flood of fresh investment in Mongo’s direction.

As such, the current share price looks like an attractive entry point to consider getting in while it’s cheap. It’s an investment that carries a fair bit of risk, no doubt. But when looking at the long-term potential, I think it’s a small risk that could result in a big reward.

The post Could this undervalued growth stock be the next big success story in US tech? appeared first on The Motley Fool UK.

So, when looking at MongoDB (NASDAQ:MDB), whose shares are down almost 40% in a year, the question becomes, is this a buying opportunity? Let’s take a look.

Volatility in technology

Like many tech stocks in the US, MongoDB shares are no stranger to volatility. The NoSQL database provider has gotten a lot of attention in recent years, both from investors and businesses alike. Its technology serves as an alternative to traditional relational databases and is far better equipped for handling humongous datasets of unstructured data.

Like many tools in the tech space, MongoDB’s platform is not suitable for every task. But for machine learning and AI, it’s a perfect fit. And that certainly gives it some exciting long-term potential that’s already being used by 47,800 customers, including leading British firms like Vodafone, Barclays, and AstraZeneca, among others.

Prior to inflation entering the mix, the growth stock was on a rampage, surging more than 1,700% between 2017 and 2021. But like many tech stocks, the stock market correction proved brutal, with a 60% slide in 2022. Things appeared to be steadily getting back on track until its most recent earnings report sent shares tumbling once more. What happened?

Outlook and expectations

Despite what the recent tumble in market cap would suggest, MongoDB actually beat its adjusted earnings target. Analysts were expecting adjusted profits on a per-share basis to land at $0.40. Instead, they actually came in at $0.51 – 27.5% higher. Revenue also came in higher than expected at $450.6m versus $439.6m. So, why were investors so eager to sell?

The answer lies in management’s guidance. Despite achieving double-digit growth, the firm has reported signs of things slowing down more than initially anticipated. Subsequently, management cut its full-year guidance to an underwhelming level. And when trading at high multiples, that’s a welcome invitation to volatility.

It’s worth remembering that the US is currently suffering from a rebound of inflation, which now sits at 3.4% despite falling to 3.1% at the start of 2024. That’s ahead of the Federal Reserve’s target of 2%, which means interest rate cuts have been delayed. As such, more businesses, including MongoDB’s current and potential customers, are largely avoiding spending as much as possible, making growth more challenging.

However, that could quickly change once rate cuts start entering the picture. And with it, MongoDB’s growth could resume its historical surge, sending the share price back in the right direction.

There’s no denying that an investment in this enterprise carries significant risk. But given its long term potential, considering a small position could prove lucrative once economic conditions improve. At least, that’s what I think.

The post Nearing its 52-week low, this growth stock could be the bargain of the year! appeared first on The Motley Fool UK.

Apple 

What it does: Apple is the world’s largest consumer technology company, with it being most renowned for the iPhone.  

By Charlie Keough. I already own shares in Apple (NASDAQ: AAPL), but given the stock’s recent decline, I’ve decided to buy more.  

Following the news that Chinese government workers have been banned from using iPhones, the Apple share price slid. However, I saw this as an opportunity. 

Warren Buffett once said to invest in companies you understand. And with Apple and its billions of users, the company’s core business model is pretty simple to follow. With that, it’s no surprise the American powerhouse makes up the majority share of Buffett’s Berkshire Hathaway portfolio. 

What draws me to Apple is the focus it has begun to place on its noncore products, including paid subscriptions and gadgets such as its VR headset.  

I also like Apple’s dividend. And while it’s not massive, it’s most certainly consistent.  

It’ll face headwinds in the weeks and months ahead including the potential for further Chinese pressure alongside ongoing inflationary concerns. But given the strength of the brand, I see it coming through the other side. With that, I saw the decline as a chance to buy.  

Charlie Keough owns shares in Apple.  

Barclays

What it does: Barclays is a UK-focused universal bank with commercial, investment and retail operations. 

By Dr James Fox.

Barclays (LSE:BARC) isn’t among the sexiest picks on the FTSE 100, but it makes sense to me. The banking stock trades at just 5.3 times forward earnings and 0.42 times book value, inferring a considerable discount to its net asset value as well as the sector. 

The downward pressure on banking stocks has largely been engendered by the continued rise in interest rates. Contrary to popular opinion, the BoE’s base rate has now extended far above optimal levels. 

However, it’s entirely possible that we’ve seen the last rate increase after Andrew Bailey’s commentary last week. While we’re yet to see the full impact of the last 18 months of monetary tightening – there could be more pain to come – an end to the cycle would likely be very positive for lenders amid concerns about a slew of defaults. 

So, with a normalising economic climate, and phenomenal 58% discount to its tangible net asset value, I’ve been topping up on Barclays shares.

James Fox owns shares in Barclays.

CRH

What it does: CRH produces cement, aggregates and other building materials. The group generates around 75% of its profits in North America.

By Roland Head. FTSE 100-listed CRH (LSE: CRH) is trading strongly at the moment. Pre-tax profit rose by 25% to $1.5bn during the first half of 2023.

Chief executive Albert Manifold expects “significant increases” in US government spending to drive further growth during the second half of this year.

Against this backdrop, the stock’s forecast price-to-earnings ratio of 12 doesn’t seem too expensive to me.

The other reason I invested was a little more speculative. CRH is about to move its primary stock market listing from London to New York.

My research suggests CRH looks a little cheaper than its US-listed rivals. I reckon the shares could benefit from a higher valuation once the US market gets to know this £30bn business.

Of course, I could be wrong. Construction is cyclical and the US economy could slow, leading to a profit slump.

Time will tell. But right now, I think CRH looks interesting.

Roland Head owns shares in CRH.

Kraft Heinz

What it does: Kraft Heinz is multinational food company. Its products include Phildelphia, HP Sauce, and Capri Sun

By Stephen Wright. Shares in Kraft Heinz (NASDAQ:KHC) have been at their 52-week low lately with a dividend yield of around 4.5%. I’ve been using the opportunity to load up in my portfolio.

The business doesn’t really go through the cyclical ups and downs that other industries face. As a result, I think it’s important to seize opportunities when they present themselves.

Inflation is often a risk in this industry and Kraft Heinz isn’t immune to this threat. But the company has a number of advantages when it comes to dealing with cost increases.

First, the company’s size of the company’s operations allow it to explit economies of scale. Second, the strength of its brands help it to pass costs through to consumers.

Essentially, I see Kraft Heinz as a company that has some long-term competitive advantages. These make the short-term weakness in the share price look like a buying opportunity to me.

Stephen Wright owns shares in Kraft Heinz.

Legal & General Group  

What it does: Legal & General Group provides wealth, protection and retirement products chiefly in Europe and North America.

By Royston Wild. I first bought Legal & General (LSE:LGEN) stock for my portfolio in the spring. And I added to my position in August after half-year trading numbers sent its share price falling again.

Okay, news of a 2% fall in operating profit over the period wasn’t ideal. Demand for financial services is coming under pressure as the cost-of-living crisis endures. 

Yet the long-term outlook for the FTSE 100 stock remains super bright, in my opinion. And as someone who buys shares to hold for several years at least, I think the company could deliver excellent returns in that time. 

Uptake of retirement and wealth products is tipped to surge over the next decade as people take post-work financial planning more seriously. Pleasingly, Legal & General’s strong brand power should allow it to make the most of this opportunity. 

Today its shares trade on a forward price-to-earnings (P/E) ratio of 9.3 times. They also carry a 9.5% dividend yield. I think it’s a brilliant value stock to buy at current prices. 

Royston Wild owns shares in Legal & General.

London Stock Exchange Group

What it does: London Stock Exchange Group is a diversified financial markets infrastructure and data business that operates through three divisions: Data & Analytics, Capital Markets, and Post Trade.

By Edward Sheldon, CFA. London Stock Exchange Group (LSE: LSEG) is a high-quality company, in my view. And I think it’s well placed to generate solid growth in the years ahead.

In its H1 results, which were published in August, the company advised that it has made a “strong start” to its recent partnership with tech giant Microsoft. It noted that its customers will begin to see the benefits next year.

It also said that it is harnessing the power of artificial intelligence (AI) technologies across the business. “Both LSEG and our customers are well positioned to benefit from the rapid developments in AI technologies which will enhance the value of our data, improve customer workflow and drive ongoing efficiencies in our own business,” wrote management in the H1 report.

But it’s not just the growth potential that attracts me here. I also like the capital returns. For H1, the group declared a dividend of 35.7p per share, up 12.6% year on year. Additionally, it said that it expects to buy back up to £750m worth of shares before April 2024.

Now, the valuation here is well above the market average. This adds risk.

Overall, however, I see the long-term risk/reward setup as attractive.

Edward Sheldon owns shares in London Stock Exchange Group and Microsoft.

MongoDB

What it does: MongoDB is a document-oriented cloud database-as-a-service provider that powers big data applications worldwide.

By Zaven Boyrazian. Behind almost every modern data-driven technology lies a database. And while companies like Oracle have long dominated this space, the level of competition is heating up. And MongoDB (NASDAQ:MDB) has been making waves.

The firm provides cloud database storage solutions that use the document-oriented approach rather than the traditional relational table method offered by Oracle. Without going too far into the weeds, this alternative architecture enables developers to read and write unstructured data exceptionally quickly.

That’s critical for technologies like IoT, 5G, and machine learning, where low latency is an absolute must. So, it’s no surprise that demand is on the rise. In fact, the latest earnings report beat analyst expectations by more than double!

Of course, no investment is without risk. Stealing market share from long-established rivals isn’t cheap. And as an unprofitable enterprise, the level of volatility remains elevated even now that markets have started cooling down.

Nevertheless, with losses shrinking, the long-term potential looks explosive in my eyes.

Zaven Boyrazian owns shares in MongoDB.

Smurfit Kappa Group

What it does: Smurfit Kappa Group specialises in manufacturing paper-based packaging and runs a network of paper, recycling and forestry operations, including its own paper mills. 

By Harvey Jones. I’ve been on a buying spree this summer filling up a self-invested personal pension (SIPP) and one of the stocks that excited me most was Dublin-based packaging group Smurfit Kappa Group (LSE: SKG).

I thought it was a real dark horse, a lesser-known FTSE 100 stock with terrific growth prospects once the cost-of-living crisis eased and e-commerce resumed in its full corrugated paper glory. It looked cheap, too, trading at around seven times earnings and yielding roughly 4.5%.

Smurfit dipped 10% shortly after I bought it on 10 June and I kicked myself for failing to average down after the stock rebounded just as sharply.

Now I’m glad I didn’t, because the Smurfit Kappa share prices has crashed almost 17% on news that it’s combining with US rival WestRock to make the world’s largest listed packing group worth almost £16bn. It will seek a New York listing, with a standard listing in London.

CEO Tony Smurfit has been working out how to crack the US for years and reckons this will boost earnings per share by more than 20% in the first full year.

Unfortunately, markets disagree. The merger may incur hefty upfront costs before we see those efficiency savings and many fear Smurfit has overpaid at $43.51 per share, a whopping 36% premium to WestRock’s closing price.

I hadn’t banked on these shenanigans when buying the stock but I’m not going to sell and crystallise what I hope is only a short-term loss. I will hold on and hope that Tony Smurfit’s US dream is worth the high price he paid.

Harvey Jones owns shares in Smurfit Kappa

The post 8 stocks that Fools have been buying! appeared first on The Motley Fool UK.

AI vs Keywords

As a quick reminder, Keywords Studios is a critical supplier of talent services to the video game industry. The company owns a global network of development studios that work alongside some of the biggest publishers in the world, including Electronic Arts, Activision Blizzard, and Ubisoft.

This picks & shovels play in gaming has proven immensely profitable over the years. After all, the stock price has increased roughly 1,120% over the last decade. That’s an average 28.4% annual compounded rate of return, making it by far one of the best stocks to buy in 2013.

But in 2023, its performance has been pretty dreadful. Year-to-date, the shares have fallen by over 35% as investors fear AI may soon disrupt this company’s business model. While this has some validity, the reaction seems overblown, in my opinion.

Several leading AI tools used in game development today, such as Yokozuna Data and KantanAI, are owned by Keywords. And management has been actively ramping up its investments in this space in preparation for the eventual technological shift.

While the stock trades at a high P/E ratio of 35, compared to its historical track record, that’s pretty cheap. And it’s why I’ve been drip-feeding more capital into my position.

A new database is needed

Like many tech stocks, MongoDB got pummelled into the ground last year, falling by over 60%! And while the stock certainly got ahead of itself before that in terms of valuation, this again looked like an overreaction. That’s why I’ve been steadily buying more since June last year. And considering the stock has climbed over 40% since then, my conclusion seems spot on (at least for now).

MongoDB is a software-as-a-service company attempting to disrupt database titans like Oracle. Instead of using a traditional relational table approach designed in the 1970s, the company uses a new method called document-oriented.

Document-oriented databases aren’t always the best choice. But when it comes to massive unstructured data, much like what’s used to train machine learning algorithms, they’re much faster than relational table databases. So, it’s no surprise that in its latest earnings report, revenue grew by almost 30%, with losses shrinking from $77.3m to $54.2m year on year.

As an unprofitable enterprise, the risk is undoubtedly elevated. And with the cost of external capital increasing, shareholders will likely encounter further volatility in the future. But given the impressive technology and track record of consistently beating expectations, I’m cautiously optimistic about the long-term growth potential of this business. That’s why I believe it’s one of the best stocks to buy today.

The post My 2023 best stocks to buy list: shares I think are poised for a recovery appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Liberty Media Corp

What it does: the company is a global media group owning some large brands, notably Formula 1.

By Jon Smith. Over the past year, Liberty Media (NASDAQ:LMAC.A) shares have jumped by almost 23%. The main three brands are SiriusXM, Formula 1 and the Atlanta Braves baseball team.

The diversification between broadcasting and sport gives the company multiple streams of income from uncorrelated businesses. Business is going well at the moment. For example, Q1 revenue for F1 was $381m despite only two races during the period! The Braves recorded a season opener with 42,000 fans, the largest home crowd in its history.

The best part is that I feel live sporting events are unlikely to be replaced with artificial intelligence (AI). Therefore, I think the stock is a good hedge against AI disruption.

The group is always on the lookout to acquire new businesses. There’s a risk here, as it’s a tight gap between good diversification and spreading resources too thinly.

Jon Smith does not own shares in Liberty Media.

MercadoLibre

What it does: MercadoLibre operates Latin America’s largest e-commerce marketplace and a fast-growing payments ecosystem.

By Charlie Carman. MercadoLibre (NASDAQ:MELI) is incorporated in the US, but Latin America is its domain. The company operates in 18 countries and occupies a market-leading position in each of its major jurisdictions.

The first-quarter results were strong. A 58.4% increase in net revenue on a neutral FX basis to $3bn comfortably beat analysts’ expectations.

The firm’s fintech arm, Mercado Pago, shows particular promise. Its low-cost secure payments system is proving to be increasingly popular. That’s unsurprising considering the oligopolistic nature of the banking systems in many LatAm countries where high fees are commonplace.

Of course, the stock faces risks. Regional political instability is a concern. So too is currency volatility. MercadoLibre conducts business in local currencies but takes on debt in US dollars.

Nonetheless, the company is well placed to capitalise on secular growth opportunities in emerging markets. If I have spare cash, I’ll buy this stock for my portfolio in July.

Charlie Carman does not own shares in MercadoLibre.

MongoDB

What it does: MongoDB is a software-as-a-service company operating a cloud-based platform that enables customers to handle enormous datasets.

By Zaven Boyrazian. MongoDB (NASDAQ:MDB) is one of many technology companies powering the world’s online platforms. Its database solution takes a different approach compared to traditional relational table architectures, making it highly flexible for vast quantities of unstructured data.

This has proven immensely valuable to drug development firms like AstraZeneca, cloud software platforms like those provided by Adobe, and 5G connectivity services from Vodafone, among countless others. It’s also capable of handling enormous data sets needed to train machine learning algorithms.

The growth stock isn’t cheap, and other players like Oracle operate in this space with far more financial resources at their disposal. However, MongoDB’s growth continues to defy expectations, with its latest earnings report reporting an EPS nearly 200% higher than expected.

That’s why, despite the relatively high risk, I’ve been steadily increasing my position in this business over the last 12 months.

Zaven Boyrazian owns shares in MongoDB.

The post Best US stocks to buy in July appeared first on The Motley Fool UK.

But with such rapid declines, have buying opportunities emerged? I certainly think so. Let’s explore two disruptive tech stocks that I believe have enormous growth potential ahead.

A disruptive tech stock taking on big data

Elastic (NYSE:ESTC) has had a fairly rough run of late. Like many stocks in the ongoing tech market crash, the share price has dropped nearly 60% since November. That brings its 12-month performance to a disappointing -51% return.

So, what does this company do? Elastic is essentially a tool for data searching and analysis. The technology has proven to be essential for countless prominent enterprises. The long client list includes Netflix, which uses it to power its show-searching feature, and Just Eat for finding restaurants near a hungry customer’s location.

Are there risks? Of course. This remains an unprofitable business making it dependent on external financing. Yet with the share price dropping so much, raising capital through equity is less of an attractive option. This means it may have to turn to debt financing to keep the lights on. The group does have $879m (£650m) of cash on its books providing plenty of liquidity for now. But obviously, this won’t last forever.

Having said that, data is quickly becoming the world’s most valuable commodity. As such, the ability to search through and analyse it, is gaining ever more importance. And in my opinion, that creates an exceptional growth opportunity for Elastic. Therefore, while the risk is high, I am considering opening a small position in my portfolio.

Another tech stock sold off in the market crash

Continuing the theme of big data, another tech stock to have caught my attention is MongoDB (NASDAQ:MDB). This company is trying to revolutionise the data management industry with its document-oriented database system.

Most databases today are built using relational tables. However, this architecture is over 50 years old and was never designed for handling enormous quantities of information. MongoDB’s solution allows data structures to evolve rapidly without performing time-consuming migrations. And since data points that are frequently used together can be stored in the same location, read & write speeds become near-instant. In layman’s terms, it’s significantly faster than legacy databases provided by industry giants like Oracle.

Of course, taking on massive enterprises isn’t a risk-free process. Switching from a relational table to a document-oriented database is an arduous task that has generated high switching costs for businesses already using the older architecture. In other words, MongoDB could struggle to expand its roster of large clients. And, in turn, its revolution could fail.

But management is fully aware of this and has since begun targeting smaller enterprises, resulting in revenues climbing by an annual average of 57% over the last five years. And with the stock market crash pushing shares down nearly 25% since the start of 2022, I think now could be an excellent buying opportunity for my portfolio.

The post 2 disruptive stocks to buy right now in the tech market crash appeared first on The Motley Fool UK.