Nasdaq market site in Times Square. Photo by Stephen Chernin/Getty Images
The Nasdaq Stock Market led the way up in the great rally of the past two years. Now it’s leading the way down.
Nasdaq is home to most big technology stocks and many small stocks. The Nasdaq Composite Total Return Index gained more than 44% in 2023 and more than 29% in 2024. From its peak on February 19 of this year through March 14, it has lost more than 11%.
Is a buying opportunity at hand? Not yet, in my opinion. I think there will be one within the next three months.
When the time comes – perhaps when the Nasdaq Composite Index goes two weeks without declining – here are some Nasdaq Stocks that I think deserve investors’ attention.
East West
I recommended East West Bancorp (EWBC) a year ago, and it rose 21%. It’s a Pasadena, California bank that finances a lot of film and television projects and is also one of the few U.S. banks licensed to do business in China. Revenue has grown 14% a year over the past decade.
At about $88 a share, I think East West is favorably priced. That works out to about 10 times earnings, and 1.6 times book value (corporate net worth per share).
Relations between the U.S. and China are frosty, and might get even worse. But should they improve, it would be a boon to East West.
Diamondback Energy
For many years, the Permian Basin in west Texas and eastern New Mexico was a great place to find oil and gas. It still is. Now that Pioneer Natural Resources Co. has been swallowed up by Exxon Mobil Corp. (XOM), I think the best pure play on the Permian Basin is Diamondback Energy Inc. (FANG).
Over the past ten years, Diamondback has increased its revenue more than 24% a year. It slowed down last year (as did the entire oil and gas industry), which is why one can now purchase Diamondback shares for about $150 a share, or less than 10 times earnings.
Taylor Morrison
Taylor Morrison Home Corp. (TMHC), based in Scottsdale, Arizona, builds homes in Arizona and 11 other states, including Florida and Texas.
It differentiates itself from other homebuilders by emphasizing environmental controls (air filters, water filters, and safe paint) and digital marketing. It has achieved 14% annual revenue growth over the past decade.
Matson
With President Trump pushing tariffs hard, many investors fear long-term trade wars. I’m among them, but I don’t expect trade to dry up entirely. Over the past ten years, Matson Inc. (MATX), a Hawaii-based ocean shipper, has increased sales 11% a year and earnings 28% a year.
If it can do half that well in the future, I think the stock can show gains. At about $130 a share, it’s priced at only 9 times recent earnings.
Amphastar
Amphastar Pharmaceuticals Inc. (AMPH) is a drug company based in Cucamonga, California, with a specialty in inhalation and intranasal products. One of its products is naloxone hydrochloride, used for emergency treatment of opioid overdoses. Asthma inhalers are another major product.
The stock is a little below $27, and the consensus of Wall Street analysts is that it can hit $38 in a year. Revenue growth for the past decade has been at a 10.8% annual clip.
The Record
Beginning in 2001, I’ve written 18 columns recommending selected Nasdaq stocks. My latest batch, a year ago, managed only an 8.7% return, trailing behind the Nasdaq Composite and the Standard & Poor’s 500, each of which cruised to an 11.0% return.
My worst pick a year ago was MasterCraft Boat Holdings Inc. (MCFT), which fell 21%. The best was Apple Inc. (AAPL), which returned 23%.
Most years have gone better. The average one-year return on my picks from all 18 years has been 18.6%, compared to 16.0% for the Nasdaq Composite, and 12.9% for the S&P 500. My picks have beaten the S&P nine times and the Nasdaq Composite 11 times.
Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.
You’ll notice that none of the five stocks I’m recommending this year are large technology stocks, or members of the Magnificent Seven – the stocks that led the 2023 and 2024 rallies.
These stocks have struggled this year through mid-March. I think they will end the year up from where they are now, but I don’t expect outstanding gains from them.
Disclosure: I own Apple, Diamondback Energy and Matson personally and for most of my clients.
