Nvidia and Netflix: Growth and Caution

• Nvidia has recently achieved a milestone, becoming a $5 trillion company for the first time.

• Netflix, on the other hand, is set to undergo a 10-for-1 stock split due to its significant growth.

• It’s important to remember that stocks with rapid growth can experience sharper declines during market downturns.

As we approach a new year, it might be time to think about adding some new stocks to our portfolio. There are definitely a few growth stock ideas worth considering.

Nvidia (NASDAQ:NVDA), despite its impressive 145% average annual return over the last three years, doesn’t seem excessively valued given its rapid growth. The revenue in the second quarter surged by 56% year-over-year, largely driven by strong demand for data centers that support AI technology. Unexpectedly, Nvidia has become the first stock ever to reach a $5 trillion valuation.

Netflix (NASDAQ:NFLX) has also been on a growth spree, boasting an annual growth rate of 26% over the last decade. Their recent 10-for-1 stock split is indicative of this growth. While it might be nice to have ten times the shares, the total value stays the same since the split adjusts the individual stock price to about one-tenth of what it was.

In the third quarter, Netflix saw a 17% increase in revenue from the previous year, and it continues to capture more of the TV viewing landscape in the U.S. However, the stock might be somewhat overpriced. With a recent price-to-sales ratio sitting at 10.9x — above its five-year average of 6.6x — caution is advised when buying shares. Perhaps it’s better to approach this stock gradually over time.

If you’re looking for a straightforward way to invest in over 300 growth stocks, consider the Vanguard Information Technology ETF (NYSEMKT: VGT), which has averaged a 20% annual return over the last 15 years. Nvidia is among its largest holdings.

Many growth stocks and ETFs tend to take a hit during market pullbacks, so if you’re interested in these options, prepare for some ups and downs. If that feels risky, it might be worth looking into an ETF like the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP) which holds a balanced representation of 500 different companies.

Before diving into Nvidia stock, it’s essential to consider some points:

Our analyst team has outlined what they think are the 10 best stocks to consider for investment right now, and interestingly, Nvidia didn’t make the cut. These stocks have strong potential for impressive returns.