Renesas (RNECY)

If you’re looking for a top stock to help you crush your high school stock market game, then buckle up because Renesas might just be your ticket to victory. The semiconductor industry may be hitting some potholes, but Japan’s Renesas is navigating the twists and turns like a pro. This company is a major player in the automotive chip market—producing microcontrollers and other components that have been in huge demand. Around half of its sales come from the automotive sector, which means if you’re aiming to dominate your class competition, Renesas could be a solid high-risk, high-reward pick.

So why is Renesas a top stock right now? For one, the chip shortage has been a huge boost for the company over the past couple of years. As cars get more high-tech and demand for electric vehicles surges, the need for semiconductors in the automotive world is only going up. Sure, the broader semiconductor industry is facing a slowdown, with weakening sales in consumer electronics like smartphones and laptops. But here’s the thing: cars aren’t slowing down. As they become more like computers on wheels, they need more chips, which means more business for Renesas.

Renesas has also been smart about diversifying. Over the last few years, they’ve been on a buying spree, scooping up other companies to expand their reach. In 2021, they bought the U.K.-based Dialog Semiconductor for nearly $6 billion, and before that, they grabbed California-based Integrated Device Technology for $6.3 billion. These acquisitions put Renesas in a prime position for the electric vehicle revolution, adding products like wireless battery monitoring systems to their lineup. This has been great for their margins—improving from 43% in 2018 to 58% this past quarter—and sales are up 80% over the last three years. If you’re in your stock market game, that kind of growth should grab your attention.

Momentum trading, a strategy that focuses on riding short-term trends, is a great way to win your class stock market game. Renesas, with its recent acquisitions and growth in the automotive sector, could be a prime candidate for this kind of high-risk, high-reward strategy. But remember, momentum trading isn’t what you want for long-term wealth building. That’s where diversification comes in. Diversifying your portfolio—spreading out your investments across different industries or stocks—helps reduce risk. For example, an S&P 500 index fund, which invests in 500 different companies, is a classic long-term strategy. But in the short term, while you’re playing the stock market game, Renesas might give you the boost you need.

Despite its recent success, Renesas has also been paying off the debt from those acquisitions, which is a good sign for investors. Its net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio fell from 4.9 times at the end of 2019 to just 1.4 times this past June, according to S&P Global Market Intelligence. That’s important because it allows Renesas to return more capital to shareholders—like when it announced in April that it would spend $1.5 billion to buy back shares. If you’re looking for a stock that’s not only growing but also taking care of its investors, Renesas checks that box.

Right now, Renesas is trading at 10 times expected earnings—cheaper than competitors like Infineon and NXP Semiconductors. Sure, the company is being cautious about its growth in the near term, but as cars continue to evolve into tech-filled machines, Renesas is positioned to speed ahead.

If you want to win your stock market game, you’ll need a bold strategy. High-risk, high-reward momentum trading could be your best shot at grabbing that top spot in the competition, and Renesas offers a compelling opportunity. Just keep in mind that while this approach might help you win now, it’s not the long-term investment strategy you’ll want to rely on in real life. For long-term success, it’s all about building a diversified portfolio that grows steadily over time. But for your class game? Renesas could be the key to victory. So, ready to shift gears and race to the top?