In this article, we will take a look at the 10 best stocks to buy on the dip for long term. To see more such companies, go directly to 5 Best Stocks to Buy on the Dip for Long Term.
With the end of 2023 now in sight, the market is getting flooded with analyses on the important events this year and predictions for 2024. Stock market predictions are always interesting and when we analyze them in hindsight they help us understand the volatility and unpredictability of the world we are living in. When 2023 started a lot of analysts and experts were expecting a disastrous year ahead and saying that a recession would soon hit the US economy. But that did not happen, thanks to the AI-fueled rally in tech stocks and a surprisingly strong US consumer sentiment. Market experts are yet again releasing their 2024 market outlook reports. Most of them are praising the US economy for dodging a recession.
Goldman Sachs’ analyst David Kostin and his team recently said in a report that they expect the S&P 500 to end 2024 at 4,700, which would represent a 4.2% gain from recent levels. The analysts said that investors would realize at the end of 2024 that the best investment strategy in the year was to stay invested (isn’t that the best investment strategy every year?).
Kostin and his team also expect the Magnificent Seven group of mega-cap tech stocks to yet again outperform the market but they believe the risk/reward of these stocks is not attractive given the high expectations. Most of these stocks had a huge bull run in 2023 because of the AI-led rally in the stock market. Many believe the AI-related expectations are already priced in.
While recession was avoided, many analysts believe the upcoming year would not see financial markets soar to record highs. Jim Masturzo, chief investment officer at Research Affiliates, recently said that the US might be up for a long period of austerity. The analyst said that American households were able to amass a lot of cash over the past several years because after the Great Financial Crisis, the Federal Reserve eased its monetary policy to boost economic activity and growth. The Fed then eased its credit policy further to offset the effects of Trump-era tariff wars. Then the COVID-19 pandemic came in which government-back stimulus packages also gave Americans a lot of cushion in the form of cash.
Masturzo thinks another factor that made Americans richer was the US government’s spending. Federal spending jumped from $4.45 trillion in fiscal 2019 to $6.82 trillion in 2021. This was a growth of 53% or nearly $2.4 trillion in two years.
“A Game of Musical Chairs”
Jim Masturzo thinks that the first cracks in the system became visible earlier this year during the regional banking crisis. However, that crisis was controlled and later ignored amid AI-led rally in stock prices, strong economic reports (he mentioned the strong November CPI report) and other temporary factors. The analyst said that this “game of musical chairs” cannot go on forever and the massive money that was injected into the system will eventually dry up and we will have to come out of the hangover. The analyst said that the real effects of the rise in interest rates will become visible in the months and years to come and eventually we will face a recession and a long period of austerity.
The analyst also pointed to broader problems of the global stage including aging population and an overall rise in inflation. He believes inflation is expected to stick around and the next decade will be starkly different from the previous one. The report said:
“After cooling from nearly double-digit year-over-year levels in mid-2022, U.S. consumer and producer prices are increasing again. Commodity prices have been a key driver of the recent uptick in inflation and are expected to remain elevated in the medium to long term due to rising demand for both fossil fuel and renewable energy. Capital spending on oil & natural gas exploration has fallen for the last several years as producers have been forced to cope with the risks of the green “evolution” and the impact on strategic planning. Yet the global economy has not yet reached peak oil demand, meaning production must be maintained at current levels or even increased. The International Energy Agency (IEA) estimates global oil demand will increase to 105.7 million barrels per day (mb/d) by 2028, from 99.8 mb/d in 20224. Many renewable energy sources, such as nuclear and battery storage, are also commodity-dependent, creating long-term demand for the mining of materials ranging from copper to uranium and rare earth metals. Uranium prices, for example, after a decade of largesse have rebounded sharply as demand expectations have risen. As a result, commodity inputs will be a stubborn headwind to managing inflation.”
Methodology
Back in September, Citi published a list of 20 stocks in the Russell 1000 Growth Index (NYSEARCA:IWF) (VONG) that the firm believed were attractive buys on the dip for long term. These stocks were facing declines at that time. For this article we went through Citi’s list and picked 10 stocks that posted declines this year and have the highest number of hedge fund investors.
Best Stocks to Buy on the Dip for Long Term
10. TKO Group Holdings, Inc. (NYSE:TKO)
Number of Hedge Fund Holders: N/A
Sports and entertainment company TKO Group Holdings, Inc. (NYSE:TKO) is one of the stocks Citi believes you should buy on the dip for the long term. TKO Group Holdings, Inc. (NYSE:TKO) was created as a result of the merger between Vince McMahon’s WWE with Endeavor Group’s (NYSE:EDR) mixed martial arts operation UFC.
Recently, TKO Group Holdings, Inc. (NYSE:TKO) stock fell after McMahon offered to sell 8.4 million shares of the company’s common stock.
Baron Opportunity Fund made the following comment about TKO Group Holdings, Inc. (NYSE:TKO) in its Q3 2023 investor letter:
“We trimmed our investment in TKO Group Holdings, Inc. (NYSE:TKO) down to a position size we were more comfortable with because of uncertainties regarding the competitive environment in the mixed martial arts space and TV carriage deals in the wrestling vertical.”
9. Teradata Corporation (NYSE:TDC)
Number of Hedge Fund Holders: 26
Teradata Corporation (NYSE:TDC) shares were wavering back in September when Citi called it a stock to buy on the dip. However, Teradata Corporation (NYSE:TDC) has now recovered. Citi analysts believed Teradata Corporation (NYSE:TDC) was a long-term stock pick. The stock has gained about 40% year to date through November 12.
As of the end of the second quarter of 2023, 26 hedge funds tracked by Insider Monkey had stakes in Teradata Corporation (NYSE:TDC). The biggest stakeholder of Teradata Corporation (NYSE:TDC) was Cynthia Paul’s Lynrock Lake which owns a $266 million stake in the company.
Heartland Mid Cap Value Fund made the following comment about Teradata Corporation (NYSE:TDC) in its Q1 2023 investor letter:
“Technology. We added to our existing position in Teradata Corporation (NYSE:TDC), the largest provider of enterprise data analytics for complex workloads. Companies use TDC to predict a variety of events, such as when customers might switch to rivals, when parts are about to fail, or if transactions look suspicious for fraud.
While other enterprise IT companies have been reporting decelerating results, TDC continues to progress on growing recurring revenue from the cloud. The company’s hybrid/multi-cloud offering should position it well to help customers transition to the cloud. The stock remains undervalued, with a free cash flow yield above 9%.”
8. Bruker Corporation (NASDAQ:BRKR)
Number of Hedge Fund Holders: 29
Scientific instruments company Bruker Corporation (NASDAQ:BRKR) has lost about 16% year to date through November 12.
Out of the 910 hedge funds tracked by Insider Monkey, 29 hedge funds had stakes in Bruker Corporation (NASDAQ:BRKR). The biggest stakeholder of Bruker Corporation (NASDAQ:BRKR) was Ken Griffin’s Citadel Investment Group which had a $199 million stake in the company.
7. Rockwell Automation, Inc. (NYSE:ROK)
Number of Hedge Fund Holders: 32
Rockwell Automation, Inc. (NYSE:ROK) ranks 7th in our list of the stocks which Citi believes should be bought on the dip. Rockwell Automation, Inc. (NYSE:ROK) lost about 1.4% in value year to date through November 12. Last month, Rockwell Automation, Inc. (NYSE:ROK) upped its dividend by 5.9%. Rockwell Automation, Inc. (NYSE:ROK) recently posted fiscal Q4 results. Adjusted EPS in the period came in at $3.64, beating estimates by $0.17. Revenue in the quarter came in at $2.56 billion, which was about 20.2% more than the revenue posted in the same quarter last year.
Rockwell Automation, Inc. (NYSE:ROK) briefly talked about its AI products in its latest earnings call:
“In addition to continued cybersecurity and infrastructure modernization wins in this vertical, we had several wins in Q4 incorporating generative AI functionality, where our digital services business is helping our CPG customers use real-time AI assistance as they develop new products, formulations and recipes.
Life Sciences sales grew mid single digits in the quarter. This vertical is a great example of how we are delivering expanded customer value through a combination of software, hardware and digital services capabilities. This quarter, our PlantPAx system was selected by [indiscernible], a global biotechnology company developing innovative and affordable cancer medicines for their process control and environmental monitoring solutions at a greenfield site in New Jersey. Tire was up high teens in the quarter with multiple wins across the globe, including the large software deal at Prometeon Tyre I … [Read the full earnings call transcript here]”
As of the end of the second quarter of 2023, Ian Simm’s Impax Asset Management owns a $174 million stake in Rockwell Automation, Inc. (NYSE:ROK)..
Artisan Mid Cap Fund made the following comment about Rockwell Automation, Inc. (NYSE:ROK) in its first quarter 2023 investor letter:
“Rockwell Automation, Inc. (NYSE:ROK) is a leading provider of industrial automation technology. The company has a strong brand, installed base and distribution network and is expanding its product offering to include more cloud-based software to complement its leading hardware business. In the coming years, we expect the company to benefit from an acceleration in US manufacturing investment to support customers’ nearshoring initiatives and in response to federal government incentive programs to manufacture energy transition products domestically. In addition, we expect Rockwell to experience revenue and margin tailwinds in 2023 from easing supply chain constraints, which limited its ability to meet customer demand in 2022.”
6. Insulet Corporation (NASDAQ:PODD)
Number of Hedge Fund Holders: 39
Insulin delivery systems company Insulet Corporation (NASDAQ:PODD) ranks 6th in our list of the best stocks to buy on the dip for the long term according to Citi. Insulet Corporation (NASDAQ:PODD) has lost about 45% year to date through November 12.
As of the end of the second quarter of 2023, 39 hedge funds tracked by Insider Monkey had stakes in Insulet Corporation (NASDAQ:PODD). The biggest stakeholder of Insulet Corporation (NASDAQ:PODD) was Daniel Sundheim’s D1 Capital Partners which owns a $209 million stake in the company.
Ithaka US Growth Strategy made the following comment about Insulet Corporation (NASDAQ:PODD) in its Q3 2023 investor letter:
“Insulet Corporation (NASDAQ:PODD) is a medical device company focused on the design, development, and commercialization of insulin pump systems for people with type-1 diabetes. Diabetes is a chronic, life-threatening disease for which there is no known cure. Insulet’s insulin pump system is superior to traditional practices because it provides its users with a more accurate and pain free way to administer insulin versus injecting it via syringe multiple times per day. Insulet’s stock was under pressure following the FDA’s approval of glucagon-like peptide-1 receptor agonists (GLP-1’s), Wegovy and Saxenda. These injectable drugs were approved for chronic weight management in adults who are obese or overweight with at least one weight-related condition. While the approval of these GLP-1’s is likely to have limited impact on pump system sales in the near-term, investors sold PODD fearing that these new drugs will shrink Insulet’s total addressable market over time.”
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Disclosure: None. 10 Best Stocks to Buy on the Dip for Long Term is originally published on Insider Monkey.
