When picking stocks to buy and hold for the long term, paying a bit more for outstanding companies can be a winning strategy over time. In this Backstage Pass clip from “The AI/ML Show” recorded on Jan. 5, Motley Fool contributors Toby Bordelon, Danny Vena, and Jose Najarro discuss why they think you should buy Nvidia (NASDAQ:NVDA) now.
Toby Bordelon: I got a couple of questions from Vihan in the Slido, you asked about Nvidia. Would you buy now? What do you think in terms of where the stock is? Let’s say you didn’t know anything at all, like you don’t know Nvidia, would you buy now, do you think it’s too expensive? How would you guys approach that?
Danny Vena: I have to tell you from my perspective, I actually recently, within the past couple of months, added to my position in Nvidia. So my answer is a categorical absolutely, I would, I did. I would say, this is one of the companies where it’s never been cheap. If you go back and you look at Nvidia’s price-to-sales ratio, over the years, going back a decade. There were a few times where you could have got it at a considerable discount, like I don’t know, say February or March of 2019 when the market crashed back during the Great Recession. There’s been a few times where you could get it cheap. But essentially, you’re not going to get Nvidia for very much of a discount, and I think the discount that you’re getting now is about as good as any and you can always add to it over time.
Jose Najarro: This is a company that for me, it’s every time I buy a company, I always think I’m the worst timer, I feel like in the next 12 months, the stock price will most likely go down. But in the long time frame, I feel like Nvidia at these price levels is cheap. If I was to buy at these levels, I would understand that, hey, there might be a possibility that within the next 12 months it might seem like a bad pick that I grabbed that stock. But I believe that for me in the long term, it would almost be a no brainer to some extent moving into the future.
Toby Bordelon: You pay for quality right, typically. In a lot of markets you’ve got to pay up for quality and better to pay. I think we are in agreement, this is a good company. Better to pay up for a good company than pay up for a bad [laughs] company. I guess I would be with you guys on this as well. I would want to regret overpaying for a great company than overpaying for a terrible company. I think what we’ve got here is a great company, so maybe you’ll overpay a little bit now in theory. But as Jose said, five years later, it doesn’t look like you overpaid at all. If you follow Danny, as you said, he just recently added, so that’s conviction for you, that’s conviction.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.