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Many holdings in investors’ Stocks and Shares ISA portfolios will have dropped significantly last week. I know mine did!
There was hardly anywhere to hide, with FTSE 100 banks and US tech stocks getting hit equally hard.
Admittedly, it might seem more like a time to run for the hills rather than invest further money into a falling market. However, some stocks are starting to look extremely attractive for long-term investors like myself.
Here are two I see right now.
Amazon
The first stock is Amazon (NASDAQ: AMZN). As I type, shares of the e-commerce and cloud computing juggernaut are down 28% in just two months!
This has nothing much to do with the company’s recent performance and everything to do with the developing US-China trade war. And there are risks here, to be sure. Many third-party sellers on Amazon source products from China. If high import taxes lead to higher prices for consumers, it might slow down its core e-commerce operation.
Longer term though, this is a company that I see getting ever larger. It holds a leading 30% share of the lucrative global cloud computing market through Amazon Web Services (AWS). Its online advertising business jumped 18% year on year to $17.3bn in the fourth quarter.
There are blue-sky opportunities developing in robotaxis and its soon-to-deploy satellite broadband constellation, Project Kuiper. Kuiper could one day become a rival to SpaceX’s Starlink business.
The valuation also suddenly looks attractive. The price-to-earnings ratio for this year’s forecast earnings is around 27, which is the cheapest that multiple has been for many moons.
In my eyes, this is one of the most attractive Big Tech buying opportunities to open up in quite a while. I currently don’t own Amazon shares, but I can see that changing in the near future.
A ready-made portfolio
If picking individual stocks like Amazon might seem a bit too risky, then investors could consider Scottish Mortgage Investment Trust (LSE: SMT).
This FTSE 100 investment trust holds Amazon as a top position in its portfolio, along with Instagram owner Meta Platforms, SpaceX, and Latin American e-commerce leader MercadoLibre.
In response to Trump’s tariffs, the trust’s share price has bombed more than 10% in just a few days.
The managers of Scottish Mortgage recently highlighted Meta and e-commerce software provider Shopify as examples of companies likely to benefit from the application side of the artificial intelligence (AI) revolution.
Shopify shares have been absolutely battered recently — down 28% in two days! So, as a Scottish Mortgage shareholder, I hope the managers are using this sudden market downturn to add to their highest-conviction holdings. That could work out very well, assuming the holdings continue to do well and recover.
Naturally, the brewing trade war presents risks, as the profits of many key holdings might be hit hard. This could dent the value of Scottish Mortgage’s portfolio.
However, the trust is now trading on a wide 11% discount to net asset value (NAV). Again, I think this FTSE 100 stock could prove to be a bargain at 843p a few years down the line, once the current mayhem is hopefully a distant memory.
I’m also tempted to buy more Scottish Mortgage shares if the selling continues.
