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Taiwan Semiconductor ADR(TSM-N)

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2 Stocks Down 30% to 81% to Buy Right Now

Motley Fool - Mon Dec 4, 2023

Stocks have surged in November on signs that the Federal Reserve could be done raising interest rates, and mostly solid results in earnings season. Following that, the S&P 500 looks set to cap off 2023 with above-average gains for the year.

However, there are still a number of stocks trading at steep discounts following the bear market in 2022. Keep reading to see two that look like great buys right now, according to these Motley Fool contributors.

A stock market chart going down

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This semiconductor stock is a clear leader

Keith Noonan (Taiwan Semiconductor): While many companies around the world design their own chips, very few can manufacture their designs profitably and at scale. When top chip designers need semiconductors fabricated, they often turn to Taiwan Semiconductor Manufacturing(NYSE: TSM) -- or TSMC, as it's often called.

TSMC is the world's leading manufacturer of semiconductors, and its stock stands out as a great way to play the long-term growth of the chip industry and the global economy at large.

Notably, the semiconductor industry tends to be subject to cyclical demand trends that correspond to new product launches and innovations. While the recent rise of artificial intelligence (AI) has created explosive growth for some tech companies, the overall chip industry is actually going through a down cycle right now. Largely due to cyclical trends, TSMC stock is still down roughly 30% from its high despite explosive demand growth in the AI category.

But the downturn for the broader chip industry won't last forever, and TSMC is set to benefit when overall demand recovers. The company controls over 60% of the global market for contract semiconductor manufacturing.

When it comes to high-performance chips, its lead is even more pronounced. For high-end chips used for AI and other computationally intensive applications, the company has a market share exceeding 90%.

The company also pays a dividend and has never lowered its payout since it started returning cash to shareholders in 2004. Its stock yields roughly 1.9% as of this writing.

For long-term investors looking to capitalize on the growth of the tech sector and bank some dependable dividend payments along the way, TSMC stock is a worthwhile investment right now.

A payments stock worth a closer look

Jeremy Bowman (BILL Holdings): Shares of small and medium-size business payments specialist BILL Holdings (NYSE: BILL) fell off a cliff after its most recent earnings report as the company offered disappointing guidance for the rest of the year.

The first-quarter earnings report was solid, with total revenue up 33%, or 24% excluding revenue related to interest income. But its cautiousness seems to reflect broader weakness among small and medium businesses (SMBs) as fears of a recession have persisted.

For the full fiscal year, the company expects revenue growth of just 14% to 18% as its business is directly connected to payment volume from SMBs, which tend to be more sensitive to the macro environment.

However, those headwinds should prove to be temporary since they're a response to a challenging economy. After the sell-off, BILL shares look well-priced, trading at a forward price-to-earnings ratio of 36 based on its guidance, which seems like a good value if you believe its revenue growth will return to its historical pace of at least 30%.

Lastly, the company has clearly established itself as a leader in its niche payments industry with nearly 500,000 customers, and a track record of acquisitions that has helped expand the business from accounts payable and receivable payments to expense management and invoicing.

The stock is now down 81% from its peak in 2021, setting up a good buying opportunity for long-term investors.

10 stocks we like better than Taiwan Semiconductor Manufacturing
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Jeremy Bowman has positions in Bill. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bill and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

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