Although the red ink splashed on the equities sector has many bulls in the dumps, it’s also important to remember that the doldrums open opportunities for these 7 stocks to buy on the dip. To be fair, you don’t want to just react to volatility in a simplistic Pavlovian manner. However, by filtering out companies with a credible business framework, you can set yourself up for significant future profitability.
I don’t want to come off as a sleazy used-car salesperson. I realize that oil prices will likely rise for the next several months due to global production cuts. That implies rising inflation, even though the Federal Reserve probably will get aggressive with its hawkish monetary policy. With global recession already a risk factor, the circumstances suggest stagflation. Such pain can hurt even the best stocks to buy on the dip.
Nevertheless, the market, over time, will sort things out. Remember when the coronavirus pandemic struck, and the surrounding events seemed apocalyptic? Now, it looks like people are completely over the global health crisis. Therefore, it may pay to consider these 7 stocks to buy on the dip based on relatively predictable human behavioral cycles.
|GOOG, GOOGL||Alphabet||$98.62, $97.80|
Alphabet (GOOG, GOOGL)
For contrarian investors shopping for the best stocks to buy on the dip, look no further than Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). Sure, the company receives a lot of flak for various political and ideological reasons. But at the end of the day, the technology giant owns the internet. And such dominance will likely offer enduring relevance.
According to the latest data, Alphabet’s Google commands a 92.4% market share of the search engine sector. Obviously, nothing else comes close. Again, while Alphabet generates political controversies, here’s something we, as Americans, can all agree on. It’s better for a U.S.-based company to dominate search rather than a Russia or China-based competitor.
Financially, Alphabet’s business profile is arguably too undervalued to ignore. As you might have guessed, the company enjoys tremendous growth and profitability metrics. Being involved in pioneering tech sectors will do that to an organization. As well, Alphabet wants a robust and stable balance sheet. Down about 31% for the year, GOOG and GOOGL represent outstanding candidates for the best 7 stocks to buy on the dip.
Known for putting other (smaller) companies into a sea of red ink, e-commerce giant Amazon (NASDAQ:AMZN) is finally getting a taste of its own medicine. Fundamentally, it’s relatively easy to understand why AMZN struggles so much. While e-commerce sales continue to rise higher as a percentage of total retail sales, this metric peaked in the second quarter of 2020. Therefore, AMZN traded in overbought territory.
Still, those seeking the best stocks to buy on the dip should probably consider Amazon. On the e-commerce front, relative to total retail sales, demand increased from 14.3% in Q1 of this year to 14.5% in Q2. It’s a slight bump, to be sure, but a bump nonetheless. Moreover, it reflects some normalization entering the consumer economy, which should benefit AMZN in the long run.
Like Alphabet above, Gurufocus.com labels Amazon’s business as significantly undervalued. While its balance sheet is decent, Amazon comes alive in performance metrics related to the income statement. For instance, its three-year revenue growth rate stands at 25.1%, beating 87% of its peers. Its three-year book growth rate pings at 45.2%, whereas the industry median sits at 3.9%.
One of the worst-hit tech firms, Block (NYSE:SQ), suffered a 65% loss of market value since the start of this year. However, it’s also understandable. The company, formerly Square, specializes in card payment readers and business management software. Earlier, Block sparked a positive reputation for leveling the playing field between small and large enterprises.
However, 2022 has been a challenging year for Block, mainly due to inflationary risk factors. With the Fed seeking to control higher prices through raising interest rates, borrowing costs for small businesses will rise. Since small businesses represent the lifeblood of the U.S. economy, whatever hurts this sector hurts us all.
Still, shifting workforce dynamics should eventually help lift SQ stock. For instance, more people will likely join the gig economy, boosting demand for small-business-related solutions.
To be fair, Gurufocus.com labels Block as a possible value trap on paper. However, at some point, the business community will recover. Given the company’s leadership in solutions for small or independent enterprises, contrarians should consider SQ one of the best 7 stocks to buy on the dip.
Sea Limited (SE)
Suffering a staggering loss of 73% on a year-to-date basis, Singapore-based Sea Limited (NYSE:SE) admittedly presents a risky profile for stocks to buy on the dip. Given the steep erosion of equity value, SE might seem more like an exercise in catching falling knives. Still, for the brave contrarian, some upside opportunities may exist.
Featuring an array of digitalization and financial technology services, Sea Limited has an opportunity to dominate the Southeast Asia internet economy. Per Reuters, this segment could reach a valuation of $1 trillion by 2030. Thus, patient investors of SE stock can potentially win big.
Another factor to consider is a growth opportunity. Currently, the internet penetration rate in the Southeast Asia region is 75% in the more mature economies and only about 60% in less-developed areas. These stats leave plenty of room for infrastructural development, which may later translate to greater demand for Sea.
Yes, on paper, SE represents a possible value trap. However, this is a growth opportunity tied to a transparent growth market.
Uber Technologies (UBER)
There’s no need to shy away from the harsh criticisms that Uber Technologies (NYSE:UBER) faces. While ride-sharing platforms garnered intense interest – including a conspicuous rise in engagement among older demographics – the present macroeconomic headwinds present plenty of obstacles. Therefore, it’s not surprising that UBER stock has slipped 36% since the start of this year.
At the same time, UBER could qualify as one of the stocks to buy on the dip. Aside from the red ink, the company has a chance to monopolize the vehicular component of the ride-sharing economy effectively. For instance, its decision to expand internationally and temporarily eschew profitability concerns may be significant as travel patterns fully normalize.
Uber also made another profit-crunching but growth-effective decision to incorporate food deliveries via Uber Eats. Again, you can tell that the bottom line is hurting for Uber. It also ranks as a possible value trap. But the company can leverage its brand power to become an everyday commodity in the sharing economy. Therefore, it might be worth a shot for speculators.
H&R Block (HRB)
For some time, I’ve been talking about tax services firm H&R Block (NYSE:HRB) as an investment to consider for the burgeoning gig economy. Primarily, the framework centered on the differences between employee tax-filing requirements and independent contractors (i.e., gig workers). Without getting too caught up in the granularity, W2 filing requirements for employees are easy to process. Frankly, the federal government does most of the heavy work.
For gig workers, the situation is much different. Essentially, independent contractors are living corporations. So, they are responsible for their own paperwork. That can be very daunting for first-time gig workers. Therefore, H&R Block can help guide newbies to their new gigging lifestyle (which involves plenty of tax work, unfortunately).
To be clear, HRB is a massive winner this year, gaining nearly 56%. However, in the trailing month, shares slipped 16%. I believe they can fall even further in the near term. Nevertheless, keep HRB on your radar because of its enormous relevance for the future of work. Longer term, it’s an excellent idea for stocks to buy on the dip.
Among the most groundbreaking companies to enter the grand public limelight during the new normal, Moderna (NASDAQ:MRNA) acquired fame – and perhaps notoriety in some circles – for participating in the race to develop a coronavirus vaccine. It represented one of several options for people, thus symbolizing the power of the human spirit when people unite to solve everyday problems.
Not shockingly, MRNA stock skyrocketed last year, trading hands at well over $400 at its peak. Since then, circumstances have looked far less auspicious. One headwind stemmed from social normalization, which ironically led to diminishing fears of Covid-19. After all, the distribution of a vaccine itself sought to deliver said normalization.
At the moment, MRNA stock finds itself down over 49%. However, it could be one of the stocks to buy on the dip for patient investors. Moderna can leverage its messenger-RNA-based platform’s technical know-how to research and develop other therapeutics. In addition, the company enjoys a strong balance sheet relative to the industry, giving it greater breadth for researching therapeutics.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.