2 Tech Stocks To "Buy The Dip"

It’s been a wild start to November for investors with the Nasdaq Composite (COMP) coming off of its worst 5-day stretch since September, before following that up with one of its strongest rallies all year. The Nasdaq is now less than 3% from new all-time highs, which has led to a surge in demand for leading growth stocks.

Fortunately, while the Nasdaq Composite is beginning to get a little extended short-term, there are a couple of tech stocks have spent the past month pulling back to support levels that are getting closer to low-risk buy areas. These names are both leaders in their respective industry groups when it comes to sales growth, and they should be at the top of one’s shopping list. Let’s take a closer look at them below:

(Click on image to enlarge)

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(Source: TC2000.com)

Zillow Group (ZG) and Avalara (AVLR) don’t have a ton in common other than being relatively newer public companies, but both are sporting strong sales growth and have unique products & services that give them a long runway for growth. In Zillow’s case, the company has de-cluttered the home buying and selling process with its new Zillow ‘Offers’. This allows anyone looking to sell their home the ability to get a cash offer from Zillow without showing the home, worrying about staging it, or having to wait for a drawn-out closing date.

In Avalara’s case, the company is the #1 software product for automated tax compliance, with AvaTax helping businesses navigate the confusing tax laws that differ from state to state. Both companies posted 25% plus sales growth in their most recent quarter, and fund ownership for each name has climbed for three consecutive quarters as growth funds prepare for each company to become profitable.

Beginning with Avalara, the company went public in 2018 and has put up an incredible performance since its debut with a 200% return. The stock’s outperformance vs. its peers is partially due to the South Dakota v. Wayfair ruling in 2018, which saw the Supreme Court rule in favor of South Dakota, which allowed states to require remote sellers to collect and remit sales tax. For businesses operating with minimal issues for years across several state lines, things quickly became confusing as every state has its different thresholds that decide when sales tax must be collected. Worse, some states even have different rules across separate counties or jurisdictions.

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Disclosure: I am long ZG.

Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an ...

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