Banks were the best performing sector on the FTSE 100 last year, with Barclays and NatWest nearly doubling in value. Standard Chartered (LSE:STAN), a bank with a focus on growth markets in Asia, Africa, and the Middle East, also surged. In fact, the stock is up 78% over the past 12 months. Despite this elevated share price, I’m starting to wonder if Standard Chartered is a bargain hiding in plain sight. After all, the company’s valuation metrics scream ‘Buy’.

These valuation metrics are very appealing

Standard Chartered’s valuation appears attractive, trading at a forward price-to-earnings (P/E) ratio of 8.1 times, representing a 35% discount to global financial peers. This is particularly noteworthy given the projected 12.1% annual earnings growth over the next three to five years, resulting in a highly appealing price-to-earnings-to-growth (PEG) ratio of 0.67. This is a near 50% discount to the global financial sector average.

Interestingly, UK-focused banks like Lloyds have typically traded with lower P/E ratios given the slow growth nature of the economy. However, Standard Chartered is even trading at a discount to Lloyds, which has a forward P/E of 9.6 times. This also suggests that Standard Chartered might be significantly undervalued, especially considering its exposure to high-growth emerging markets.

What’s more, Standard Chartered has a price-to-book (P/B) ratio of 0.76, representing a 40% discount versus the sector average. And for further context, JPMorgan — one of the most expensive banking stocks — has a P/B ratio of 2.3. In other words, investors are willing to pay a 130% premium for JPMorgan’s book, while discounting Standard Chartered.

This attractive valuation has not gone unnoticed, with CEO Bill Winters facing questions about it at Davos recently. “We’re still trading below book value, which doesn’t make any sense to me given the returns that we’re generating”, Winters told Bloomberg TV, adding that he thought the rallying share price had further to go.

The USP is also a risk

Standard Chartered’s unique selling proposition (USP) lies in its focus on leveraging the value of fast-growing economies. However, this strategy brings inherent risks for investors. Exposure to politically unstable regions, fluctuating currencies, and weaker regulatory frameworks can increase volatility. Additionally, unstable economic growth or systemic challenges in these markets may impact profitability. While its growth-focused approach offers significant potential rewards, investors must weigh these risks against the bank’s strategic positioning and broader market diversification.

All eyes on 21 February

Standard Chartered is set to report its Q4 and full-year earnings on 21 February. Interestingly, the banks that have reported to date have performed very well. This is typically a good sign for the sector. As such, I’m exploring buying the stock before the earnings date. It could skyrocket, especially if we see a strong earnings beat.

Does anyone buy National Grid (LSE: NG.) for share price gains? For me, it’s a classic dividend stock. And as long as it can keep handing over the annual cash, what else matters?

Well, last year’s rights issue to raise £7bn in fresh cash certainly shook investor confidence. The company hasn’t cut its total planned dividend payout. But it will be spread across a few more shares now, and that means less per share.

I’m also a little concerned that the National Grid dividend is typically only lightly covered by earnings. That can be fine with clear future earnings visibility and planned capital expenditure known well in advance.

Uncertainty ahead

But seeing these ambitious plans to spend a lot more money on infrastructure development suddenly makes the solid ground seem a little less firm. I’m not surprised the share price slumped when the company made its surprise announcement.

Faltering recovery

I thought the National Grid share price would recover after the initial shock, and it did. But since September it’s been on a slide again. And that’s making the stock rise up my list of potential dividend candidates for my next buy.

It’s all about the dividend, and the price fall has pushed the expected yield to 5.7%. On top of that, forecasts predict a return to progressive dividend growth following the 2024 rebasing. With interim results in November, CEO John Pettigrew spoke of “a new and exciting phase of growth with an attractive investor proposition underpinned by high quality asset growth, strong earnings growth and an inflation protected dividend“.

A 5.7% dividend yield, raised at least in line with inflation, sounds like a good deal to me. The trouble is, last year’s rights issue and dividend dilution rocked the boat. And we’ve already seen the interim dividend per share shaved by 18%. Can we rule out future rights issues and further dilution? No, I don’t think we can.

Pricey valuation?

Forecasts put National Grid shares on a price-to-earnings (P/E) ratio of 14 for the current year. And they drop it to 12 by 2027. With everything else equal, a lower value is better. And for a stock paying a reliable dividend, I’d say it looks cheap on that basis.

But a headline P/E can be misleading, as it doesn’t take into acount any cash or debt a company has on its balance sheet. Here, we’re looking at net debt of £42bn and expected to rise. Taking that into account, I estimate a debt-adjusted forward P/E of 26. And that doesn’t look like a no-brainer buy.

Part of me says I should look athow well National Grid has been rewarding shareholders for decades, and just buy for the dividend and forget the details. And that I should have done that 10 or 20 years ago instead of reaching a state of agonising indecision every time I try to decide.

And I do think investors who can buy for the income and switch off should consider tucking away some National Grid shares. What about me? More agonising indecision, I expect.

Looking for ways to make a market-beating dividend income? Here are two high-yield FTSE 100 and FTSE 250 shares — along with a big-paying exchange-traded fund (ETF) — I feel are worth serious consideration right now.

The ETF

The Invesco US High Yield Fallen Angels ETF (LSE:FAHY) doesn’t, unlike most London-listed funds, invest in local or global equities. Instead, its portfolio’s loaded with below-investment-grade bonds.

Today, more than 97% of the fund’s tied up in debt instruments with ratings of BB or B. Some of the corporate bonds it holds are from medical specialist CVS Health, clothing manufacturer VF Corp and media giant Paramount Global.

Why’s this important? A focus on riskier bonds obviously comes with a higher level of risk. But the higher yields these bonds subsequently offer also mean the fund’s dividend yields are substantially above the ETF average.

For 2025, this stands at a very healthy 7%. And with 87 different holdings, the fund’s structured to cushion the impact of potential defaults on overall investor returns.

The FTSE 100 share

Now, BAE Systems (LSE:BA.) doesn’t offer up the same sort of eye-popping dividend yields as this. For 2025, its yield is a healthy-if-unspectacular 2.8%.

Yet I believe the defence giant remains a top-tier dividend stock to consider. As the chart shows, the dividend on BAE Systems shares has risen every year for more than a decade. This has allowed investors to offset the impact of rising inflation on their wealth.

BAE Systems’ progressive dividend policy is thanks to its impressive cash flows and the dependable nature of defence spending. Even during economic downturns, the Footsie firm can expect new orders for its equipment to keep rolling in (its order book was a record £74.1bn as of last summer).

Past performance isn’t always a reliable guide of future returns however. In the case of BAE Systems, a range of problems, from supply chain issues and rising costs to disappointing project execution, could impact future earnings and dividends.

But, on balance, I’m optimistic the blue-chip weapons builder will remain an impressive passive income share.

The FTSE 250 stock

As a real estate investment trust (REIT), Urban Logistics (LSE:SHED) is set up to provide a steady flow of dividends.

Under sector rules, companies of this type must pay a minimum of 90% of annual rental profits out to shareholders. That’s in exchange for the favourable tax environment they enjoy.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

This doesn’t necessarily guarantee a large and stable income over time. The trust’s weighty exposure to cyclical sectors (like parcel services and retail) could leave earnings, and therefore dividends, vulnerable during economic downturns. Higher interest rates also have an impact on profits.

But on balance, I think Urban Logistics is pretty rock solid for dividend income. Like the aforementioned ETF, it’s well diversified to limit the risk of tenant defaults on overall returns (its top 10 tenants account for just 32% of total rents).

On top of this, Urban Logistics has long-term contracts in place to limit the threat of falling occupancy. As of September, its weighted average unexpired lease term (WAULT) was 7.6 years.

For this financial year (ending March), the dividend yield on Urban Logistics shares is 7.5%. This nudges higher to 7.6% for next year.

The FTSE 100 is a ‘no brainer’ choice for many looking to invest their hard-earned cash. London’s premier UK share index is packed with established, market-leading companies with strong balance sheets and healthy earnings prospects.

This can make them excellent ways to make a large and consistent passive income. However, the Footsie’s not all about dividends. Many British blue chips have significant growth potential, and therefore the potential to generate substantial capital gains.

Having said all that, the returns on FTSE 100 tracker funds have been put in the shade by those focused on overseas indexes more recently. So how much could someone investing £10,000 in Britain’s number one index expect to eventually make in passive income?

Better options

Since 2015, someone investing in a Footsie-tracking exchange-traded fund (ETF) would have made an average annual return of around 6.2%.

That’s not bad. But this person could have achieved a far better return by investing in US and European shares instead.

Over the past decade, S&P 500-tracking funds have delivered an average return of roughly 12.5% a year. Meanwhile, funds tracking Germany’s DAX and France’s CAC40 have delivered returns of around 6.8% and 7.9%, respectively.

I’m not saying that the FTSE 100 is a bad place to consider parking one’s cash. Indeed, the return on UK large-cap shares is far better than those delivered by some other global indexes.

For those seeking significant returns, I think purchasing individual shares could be the best way to go. Ashtead Group (LSE:AHT) is one I think is worth serious consideration today.

Star performer

Ashtead has enjoyed spectacular earnings growth by supplying rental equipment primarily to the construction industry. Sales have rocketed over the past decade thanks to rapid site expansion, helped in large part by acquisition activity. It now operates around 1,150 stores — most of which are in the US — versus 640 in early 2015.

Earnings growth has been impacted by higher interest rates more recently, as illustrated by its flatter share price. But as inflation falls, it’s hoped that central banks will slash rates in 2025 and beyond to resuscitate Ashtead’s end markets.

I’m optimistic, too, that Ashtead will rebound as the US accelerates infrastructure spending under President Trump. The FTSE firm also has further significant room for expansion to get profits chugging higher again.

Targeting a £42k passive income

Past performance is no guarantee of future returns. But if the company serves up the same 17.9% average annual return as it has over the past decade, a £10k investment today would eventually turn into £849,406 after 30 years.

Investing this into 5%-yielding dividend shares would then provide a yearly passive income of £42,470.

That’s far higher than the £2,346 someone who invested in a FTSE 100 tracker would enjoy, based on the index’s 10-year performance. That person would have made a much reduced £46,927 after 30 years.

I hold a number of individual FTSE 100 shares in my own portfolio, including Ashtead, rather than owning a tracker fund. It’s a strategy I plan to continue.

The penny stocks I’m looking at today have something in common. There are only one or two analysts offering recommendations I can find, but at least they’re all bullish. That’s one of the risks we face with penny stocks. There’s often very little analysis out there for us to use, and we can be largely on our own.

Medical devices

Creo Medical Group (LSE: CREO) makes medical instruments for surgical endoscopy, using microwave and radio frequencies. Minimally-invasive surgery can expose patients to less danger, and reduce costs.

But after an impressive start to stock market life, the Creo share price collapsed. In the past five years, it’s crashed 89%. The shares are down to 18p for a market capitalisation of £73m.

Creo‘s been one of those promising growth stock candidates we see so often. But it’s yet to make an annual profit. And forecasts suggest that’s still unlikely to happen by 2026. But at least they show the losses falling steadily.

Balance sheet boost

I see signs that 2025 could be the year that things change. In September, a new share issue raised £12m, so we’ve already had some dilution. With interim results the same month, CEO Craig Gulliford said: “The launch of Speedboat UltraSlim in late 2023, our smallest device to date, was a significant milestone and helped us to achieve record core product sales for H1-2024.”

That seems key to me. Will this new technology lead to profits in the nick of time? Or will the company need to go back to the market to raise more cash? It could all hinge on that. For investors who can handle the fear of cash running low again, I think Creo’s worth considering for its growth potential.

Smart sensing

Oxford Metrics (LSE: OMG) is profitable, with a strong balance sheet. The 2024 full year looks like it was a tough one, with adjusted earnings per share falling 44% to 5.29p. Net cash at 30 September, though healthy at £50.7m, declined 22%.

The company makes smart sensing and motion-capture technology. Its Vicon product is used in sports, education, film production, virtual reality and biomedical research. And it has an impressive list of customers, including Boeing and Ford.

But the share price is down 55% over five years, with most of that in the past 12 months. It’s down to 51p at the time of writing, for a market-cap of £65m. After a poor performance like that, why am I optimistic about Oxford Metrics?

Looking ahead

With those disappointing 2024 results, CEO Imogen O’Connor pointed out that they should be seen “against an exceptionally strong prior year comparator where our teams delivered more camera systems than ever before.”

And when it comes to the 2025 outlook, the full-year update spoke of “a good spread of opportunities across all main markets and a pipeline of new products”.

There’s clearly a risk of another painful year. But forecasts (though only from a couple of brokers) indicate a return to earnings growth and put a 97p target price on the stock. That has to make it worth further research.

Looking for the best high-yield dividend shares to buy? I’ve got you covered. Here are three to consider whose forward dividend yields comfortably beat the FTSE 100 average of 3.6% average.

Murray’s mint

Dividends are never, ever guaranteed. As we saw during the Covid-19 era, even the most financially stable Dividend Aristocrat can slash, postpone or cancel shareholder payments at short notice.

Fossil fuel giant Shell, for instance, cut dividends for the first time since 1945 during the pandemic.

Investing in an income-focused trust doesn’t eliminate this threat. But their diversified holdings mean the danger of dividend disruption can be greatly reduced. Murray Income Trust (LSE:MUT), for instance, has managed to grow annual dividends for 51 straight years.

In total, the trust has holdings in dozens of companies in the UK and overseas. Major holdings here include AstraZeneca, Diageo and National Grid. And today, its forward dividend yield is a healthy 4.7%.

Be aware however, that only a maximum of 20% of Murray Income Trust can be allocated to international shares. This could leave its share price vulnerable if broader appetite for UK stocks weakens.

Euro star

Real estate investment trusts (REITs) like Segro (LSE:SGRO) can also be great sources of passive income. This is thanks to sector rules requiring at least 90% of a firm’s rental profits to be distributed to shareholders. It’s the price they pay for breaks on corporation tax.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Property shares like this can be reliable dividend stocks for other reasons. They often lock their tenants into ultra-long-contracts which, in turn, provides a reliable stream of income. Segro’s weighted average lease term (to earliest break) was a reassuring 7.3 years as of June 2024.

With a geographic footprint spanning the length and breadth of Europe, Segro’s able to withstand localised shocks and continue paying a reliable dividend.

The FTSE 100 company’s lifted annual dividends every year since 2013. And today it carries an index-beating forward dividend yield of 4.5%.

Its share price may fall further if interest rate cuts fail to match market expectations. But over the long haul, I expect Segro to deliver strong overall returns.

Green giant

Greencoat UK Wind‘s (LSE:UKW) another beaten-down property stock that’s worth a close look. Recent share price falls have supercharged its forward dividend yield to a stunning 8.4%.

As well as interest rate risks, this renewable energy stock faces a more long-term problem that it can’t control. When the wind doesn’t blow or the sun hides, energy generation (and by extension profits) can slump.

However, Greencoat — whose portfolio of wind farms spans England, Scotland, Wales and Northern Ireland — does smooth out this risk with its wide geographic footprint.

Unlike in the US, the political landscape in Britain remains extremely favourable for energy providers like this. One of the government’s first actions was to lift the ban on new onshore wind farms last July, giving a boost to the likes of Greencoat UK.

Given the stable nature of energy demand, the FTSE 250 business can also be expected to pay a healthy dividend at all points of the economic cycle. That can’t be said for most stocks.

Warren Buffett has many disciples in the global investing community. That’s hardly surprising, given that the billionaire super-investor has essentially laid down a blueprint for people to follow to build wealth.

One interesting Buffett-influenced investor is fund manager Guy Spier. In 2008, he participated in a $650,100 charity lunch with the Oracle of Omaha.

In his book, The Education of a Value Investor, Spier frequently references Buffett as a central influence. However, in a recent podcast, he shared how his investment approach would differ if he were starting out in his 30s with ‘just’ $1m.

Here’s what he said.

Taking some risk

Now, to be clear, Spier manages more than $280m in his fund. He’s worth quite a bit. Therefore, $1m to him might be the equivalent of, say, £10,000 to a retail investor like myself.

Indeed, I’m trying to build towards a £1m (or $1.2m) portfolio, rather than starting off with that amount!

Nevertheless, the same principle applies, as it’s about growing a modest amount of money (relatively speaking) into something much larger.

Spier sensibly says that he would have living expenses covered and debt paid off before starting. That way, all focus can be on preserving and growing the portfolio through compounding rather than needing to draw upon it to survive.

With that sorted, he says he would want to take higher risks. Specifically, he would divide that sum into at least 10 shares. While they wouldn’t be too speculative so as to risk losing all the invested capital, each one would still “have a high enough probability of returning multiples of my money“.

Spier mentions making a couple of investments a year, with the aim of sevenfold returns from some over a five-year period.

Which type of stocks?

The fund manager says he would generally look at companies with a market cap under $1bn (£800m). Due to their smaller size, these have a better chance of becoming multibaggers, at least in theory.

Interestingly, Spier cites AIM companies listed in London as a place where he might look. These tend to be smaller enterprises, making AIM fertile waters to fish in for opportunities.

One I like

I agree with the general theme here. One AIM stock I hold is hVIVO (LSE: HVO), which has a market cap of just £133m.

This is a fast-growing contract research organisation specialising in testing infectious and respiratory disease vaccines and therapeutics through human challenge trials. These are where volunteers are exposed to pathogens in a controlled environment. hVIVO works with global pharmaceutical firms.

The share price has struggled lately, falling 33% in the past six months. This weakness appears related to the election of Donald Trump and concerns that vaccine research might be deprioritised, leading to fewer sales opportunities. This is a potential risk here.

However, in December, hVIVO signed an £11.5m contract with a top-tier global pharma client, then this week inked a £3.2m project, its largest standalone lab contract signed to date.

Meanwhile, the profitable company has reiterated its confidence in reaching £100m in revenue by 2028, up from £62m last year. And the best bit here is the valuation, with the stock trading at just 11.7 times this year’s forecast earnings.

From 19p, I reckon it could generate very nice returns.

Aviva‘s (LSE:AV.) been one of the FTSE 100‘s standout shares for large and growing dividends since 2014. This success follows substantial restructuring in that time to mend the balance sheet and bolster profits.

Like many UK shares, the financial services giant slashed dividends during the height of the Covid-19 pandemic. But dividends have risen sharply in the aftermath. And they’re tipped to continue increasing this year and next by City analysts.

Dividends are never guaranteed, however, regardless of past performance. So how realistic are current estimates? And should dividend investors consider buying the Footsie firm for passive income?

The forecasts

Year	Dividend per share	Dividend growth	Dividend yield
2024	35.43p	6%	7%
2025	37.90p	7%	7.5%
2026	40.49p	7%	8%

As you can see, the dividend yield on Aviva shares moves to eye-popping levels over the next two years. In fact, at 8% for next year, this is more than double the current FTSE 100 average (3.6%).

Let’s first look at dividend cover to see how well predicted payouts are covered by anticipated earnings. As an investor, I’m searching for a reading of 2 times above. At these levels, a company could still meet broker forecasts even if profits get blown off course.

Unfortunately, Aviva doesn’t score especially highly on this metric. Earnings are tipped to rise strongly over the period, by 13% and 9% in 2025 and 2026 respectively. But dividend cover still stands at just 1.4 and 1.5 times for these years.

Having said that, it’s not time to throw the towel in on Aviva just yet. Regardless of whether cover’s robust or flaky, it’s also important to consider the strength of a company’s balance sheet when assessing future dividends.

Here, Aviva performs much more encouragingly. As of September, its Solvency II capital ratio was a whopping 195%.

This is thanks to the impressive cash generation of its general and life insurance operations, which benefit from steady premium collections, and the firm’s asset management business generates recurring management fees. It also reflects the capital-light nature of Aviva’s operations.

The verdict

On balance then, I think Aviva’s in good shape to meet current dividend forecasts and is worth investors considering. The business has a great track record of delivery despite weak dividend cover. I see no reason for this to come to an end.

In fact, I’m optimistic it’ll keep delivering large and growing dividends beyond the forecast period.

Given the highly competitive sector it operates in, investors can’t take anything for granted. Additionally, shareholder returns may underwhelm over the medium-to-long term if interest rates remain at elevated levels.

Yet there’s plenty for investors to be optimistic about, in my opinion. Aviva’s pivot towards capital-light businesses bodes well for future cash flows, while earnings could rise as cost-cutting measures and strategic investments (like the acquisition of Direct Line) take effect.

It also has considerable scope to grow profits and dividends as the growing number of elderly people in its markets — combined with a rising need for financial planning — drives demand for its wealth, protection and retirement products.

I own Aviva shares in my portfolio for passive income. I intend to hold on to them for the long haul and think other investors should consider doing likewise.

Searching for the greatest high-yield dividend stocks to buy? Here are three worth further research whose forward dividend yields smash the FTSE 100 average of 3.6%.

M&G

At 10.1%, financial services provider M&G (LSE:MNG) offers the second-largest yield on the Footsie today.

Companies with double-digit dividend yields often come with danger. Such high yields can signal financial distress, an unsustainable dividend, or a falling share price. Some or all of these may signal deeper issues with the business.

However, M&G doesn’t fall into any of these categories, in my book. It’s raised dividends each year since it was spun off from Prudential in 2019, and looks in good shape to continue this.

A Solvency II capital ratio of 210% as of June implies it remains in good financial health. This gives it enough scope to keep paying large dividends while investing for growth.

I think M&G could deliver huge long-term returns as demographic changes boost demand for wealth and retirement products. I’m also encouraged by its plans to build the Asset Management and Wealth divisions, areas which are building a head of steam.

Remember, though, that profits may come under pressure in the near term if interest rates fail to fall significantly and consumer spending remains under pressure.

Global X Nasdaq 100 Covered Call ETF

By investing in a basket of assets, the Global X Nasdaq 100 Covered Call ETF (LSE:QYLD) can help investors spread risk while targeting a market-beating passive income.

For this financial year, this exchange-traded fund (ETF)‘s dividend yield’s a huge 10.9%.

As its name indicates, the fund buys stocks on the Nasdaq 100 and sells covered calls on them. The income it generates is then distributed to shareholders in the form of dividends.

There are plenty of covered call funds to choose from today. What I like about this one is that it allows investors to own tech growth shares like Nvidia and Tesla while also delivering a substantial passive income.

On the downside, the fund’s focus on growth shares leaves it vulnerable to underperformance during economic downturns. Yet I still think it’s worth serious consideration from long-term investors.

SDCL Energy Efficiency Income Trust

In an era where cutting energy usage is gaining increasing importance, the SDCL Energy Efficiency Income Trust (LSE:SEIT) has the potential to also deliver blowout returns. With a 12% forward dividend yield too, income chasers in particular should give it special attention.

SDCL’s trust is extremely diversified, which allows it to absorb shocks at group level and continue paying large dividends. The business — which has raised shareholder payouts each year since its initial public offering in 2018 — invests across multiple sectors like healthcare, retail and data centres across the globe.

The threat of interest rates staying at higher-than-normal levels shouldn’t be taken lightly by investors. Yet I believe the danger this poses to earnings is more than baked into its rock-bottom valuation.

Trading at 52.7p per share, the trust’s dealing at a near-40% discount to its estimated net asset value (NAV) per share.

As the name suggests, growth stocks are judged on their ability to deliver significant gains. The ones that do so consistently, year after year, are usually rewarded with a much higher share price.

Here, I’ll look at a pair of US-listed growth shares that have been marching upwards for years. But in the fourth quarter of 2024, they did the business again and were duly rewarded with further price gains.

Looking at their dominant competitive positions today, I think both are set up for further market-beating performances over the long term. I feel both are worthy of further research.

Intuitive Surgical

The first is robotic-assisted surgery pioneer Intuitive Surgical (NASDAQ: ISRG).

The stock was already up more than 150% in the five years prior to 15 January when the company released a Q4 trading update. Yet the market’s been happy to add another 12% after Intuitive said it expects 25% top-line growth (about $2.41bn) rather than Wall Street’s 14%.

This surprise beat came after it placed 493 of its da Vinci surgical systems during the quarter, including 174 of its latest da Vinci 5 robots. This next-generation iteration has 10,000 times the computing power of its predecessor!

For the full year, Intuitive placed 1,526 da Vinci systems, an 11% increase, taking its total installed base to about 10,000. And it expects full-year revenue of around $8.35bn, a 17% rise.

This is encouraging for shareholders due to the firm’s razor-and-blades business model. The more surgical robots it places, the more revenue it gets from selling instruments and accessories needed to run them. Most of the company’s revenue is recurring.

One key risk here would be another pandemic. During the last one, the company’s revenue declined significantly as operations were delayed or cancelled. Also, trading at 78 times forward earnings, this high-quality stock’s far from cheap.

However, the company remains a global leader in the robotic-assisted surgery space, and the long-term future continues to look very bright.

TSMC

The second company that released blowout Q4 numbers was Taiwan Semiconductor Manufacturing (NYSE: TSM). The stock’s up 9% since the chipmaking giant reported $26.9bn in quarterly revenue (up 38%) and a 57% rise in net profit ($11bn). Both figures beat Wall Street’s expectations.

Many tech firms outsource their chip manufacturing to TSMC, including Apple, Nvidia, Advanced Micro Devices, Broadcom, and Arm Holdings. And it’s custom AI chips that are really driving growth, with revenue from artificial intelligence (AI) accelerators more than tripling in 2024.

The firm’s now predicting revenue will grow at a five-year compound annual growth rate (CAGR) of 20%!

One challenge would be an unexpected slowdown in AI spending, especially as many of TSMC’s other markets are weak right now (notably smartphones and electric vehicles). It’s really the insane growth of AI that’s offsetting this weakness.

As for valuation, the forward P/E ratio’s 25. That strikes me as reasonable for a dominant company growing at 20% a year and capturing around 90% of high-performance computing chip orders.

Looking ahead, the demand for semiconductors is only likely to increase as megatrends like AI, cloud computing, 5G, electric vehicles and robotics play out. TSMC’s perfectly placed to benefit as the chip manufacturer of choice for many blue-chip firms.