Last month was rough for growth investors. I decided to make the most of the downturn, initiating positions in three companies that I feel have fallen to attractive entry points. I bought shares of Nvidia (NASDAQ: NVDA), Reddit (NYSE: RDDT), and Zillow (NASDAQ: Z) (NASDAQ: ZG) in March. The stocks are currently trading 16%, 52%,…
Last month was rough for growth investors. I decided to make the most of the downturn, initiating positions in three companies that I feel have fallen to attractive entry points.
I bought shares of Nvidia(NASDAQ: NVDA), Reddit(NYSE: RDDT), and Zillow(NASDAQ: Z)(NASDAQ: ZG) in March. The stocks are currently trading 16%, 52%, and 55% below their 52-week highs. Is that opportunity knocking or the grim reaper of bad decisions? Let’s take a closer look.
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I’ve been a fan of Nvidia for more than two decades, dating back to its days as a pioneer in unlocking the power of PC gaming with its GPUs. Obviously, I should’ve bought sooner. Even with the recent artificial intelligence (AI) boom — with the most valuable company’s revenue more than doubling in back-to-back fiscal years before decelerating to a still-impressive 66% — Nvidia stock is a six-bagger in the last three years.
Nvidia is still going strong. Revenue soared 73% in its latest quarter. You have to go back more than a year to find Nvidia growing faster, and these results are depressed given the trade restrictions in China and recent geopolitical headwinds.
Some of the more common knocks on chip makers is that they are cyclical and toil away in a cutthroat low-margin business. This doesn’t come close to describing Nvidia. It has posted annual revenue growth of 53% or better in 5 of the last 6 fiscal years. Its net margin is up to a blistering 56%, more than quadrupling from where it was a decade ago.
Another misperception worth debunking is that Nvidia has to be expensive as the only U.S.-listed stock with a market cap north of $4 trillion. Well, you can buy the stock for 21 this new fiscal year’s earnings and less than 16 times next year’s analyst profit target. Do you know how many of the Magnificent Seven stocks trade at a lower 2027 earnings multiple? None. Do you know how many of the Mag 7 names are currently growing faster? None.
There are two potential potholes to watch. A net margin of 56% is incredible, but it’s probably not sustainable for long with several deep-pocketed companies trying to cash in on ascending demand for AI chips. The other thing to watch is any of its distant rivals closing the gap, if not overtaking Nvidia. A better mousetrap is a disruptor’s killjoy.
Like many high-octane growth stocks in the current climate, the correction has been swift for cloud-based platforms in an evolving AI world. Reddit has surrendered nearly half of its value since its January peak and more than half of its peak value set in the fall of last year.
I get why some premium subscription-based enterprises and to a lesser extent consumer-facing platforms are feeling the burn, but that’s not Reddit at all. The community of communities is on a roll in the new normal. It now has a couple of the leading AI players paying Reddit to sift through its perpetually growing and well-regarded user-created forum content. Reddit is also doing a stellar job of monetizing its growing fan base.
Reddit enters this year with 121.4 million daily active unique users, a 19% increase over the past year. Revenue shot 70% higher in its latest quarter, on the strength of keeping its platform free for the vast majority of its users through stronger sponsored interest in reaching Redditors and other regulars.
Free cash flow has tripled over the past year. Earnings have doubled. You can buy Reddit for 33 times forward earnings and 24 times next year’s Wall Street profit consensus. It’s a healthy discount to its actual growth rate, and Reddit has beaten analyst quarterly profit targets by at least 33% for more than a year. Bet on the beaters.
One potential pothole worth monitoring is still AI. They are paying Reddit now, but you’re also seeing search engines lean more on AI to condense Reddit responses rather than sending users to the popular forum itself.
This is probably the riskiest of my three purchases, largely because its turnaround potential is at the mercy of macro forces beyond its control. Zillow is the leading real estate portal. It’s the first stop for many folks looking to buy or sell a home. It has become a force in the rental and mortgage financing markets. If you’re a real estate agent, property manager, homebuilder, or even real estate photographer, you’re going to want to pay Zillow for leads.
The bearish narrative has been an open house for years. High mortgage rates are keeping sellers from listing their properties, and the recent inflationary and economic concerns are only making things worse. U.S. existing home sales were flat in 2024 and 2025, at a 30-year low, with barely 4 million properties changing hands.
Somehow, in this dreary climate, Zillow has managed to grow its revenue by 15% to 16% in each of the last two years. Analysts see a three-peat in 2026. You can buy Zillow for 18 times this year’s net income and 14 times next year’s estimate.
The pothole here — let’s roll with the theme and call it a potential crack in the foundation — is that there are fates worse than stagnancy. The real estate market can get worse. Home affordability and the financial health of prospective buyers can remain glue traps. I don’t mind being early to a showing, but this turnaround has taken years just to bottom out.
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Rick Munarriz has positions in Nvidia, Reddit, and Zillow Group. The Motley Fool has positions in and recommends Nvidia and Zillow Group. The Motley Fool recommends Reddit. The Motley Fool has a disclosure policy.
3 Unstoppable Stocks I Bought Last Month was originally published by The Motley Fool
