In this article, we will take a look at the 11 best buy-the-dip stocks to buy now. If you want to see more stocks in this selection, go to the 5 Best Buy-the-Dip Stocks To Buy Now.
The leading US market indices are on their way to recording the first annual loss since 2018 and the biggest YoY decline since the financial crisis of 2008. Presently, the Dow Jones Industrial Average (DJIA) Index, the S&P 500 Index, and the NASDAQ Composite Index are down 8.6%, 18.2%, and 30.9%, respectively, for the year. Meanwhile, the three leading market indices are down 10.1%, 19.1%, and 32%, respectively, from their 52-week highs, reflecting a buy-on-the-dip opportunity present in the market. JPMorgan believes that 2023 can be the best year for bonds and stocks in a decade due to the valuation reset, and it has provided an attractive entry point to potential investors. Although there is a high possibility of a recession in 2023, the US Federal Reserve could stop increasing benchmark interest rates as inflation starts to come under control. Inflation has shown the first signs of cooling down as the November Consumer Price Index (CPI) reflected a YoY increase of 7.1% as opposed to the consensus forecast of 7.3%. This was the second consecutive month when the CPI was lower than analysts’ forecast. Earlier this year, in June, the CPI reached a four-decade high as it increased by 9.1% YoY.
The US Federal Reserve has increased benchmark interest rates seven times in 2022. Following the 0.5% increase in mid-December, the benchmark interest rate is currently in the range of 4.25% to 4.5%. This is the most aggressive rate hiking cycle by the Federal Reserve in four decades. The Federal Reserve intends to continue the interest rate hikes next year also and expects the rate to increase to 5.1% before considering a reduction. There is a widespread belief that the markets have already absorbed the impact of further interest rate hikes and a possible recession next year in their current valuation and thus provide attractive entry points in popular companies like Alibaba Group Holding Limited (NYSE:BABA), EQT Corporation (NYSE:EQT), and DISH Network Corporation (NASDAQ:DISH).
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Our Methodology
In this article, we have shortlisted 11 stocks from different industries that are currently trading near their 52-week lows. We have picked these companies on the basis of their stable business models, strong growth prospects, and positive analyst ratings. Analysts consider these stocks as offering significant upside potential from their current prices. These stocks have been ranked according to the hedge fund sentiment determined by Insider Monkey’s proprietary database of 920 funds as of Q3 2022.
11 Best Buy-the-Dip Stocks To Buy Now
11. ChargePoint Holdings, Inc. (NYSE:CHPT)
Number of Hedge Fund Holders: 13
ChargePoint Holdings, Inc. (NYSE:CHPT) is a Campbell, California-based provider of electric vehicle (EV) charging infrastructure in the US and Europe. The company has the distinction of operating the biggest network of independently owned EV charging stations.
The investment in the EV charging industry in the US is anticipated to be around $60 billion by the end of this decade and $192 billion by 2040. On December 5, Matt Summerville at DA Davidson assigned ChargePoint Holdings, Inc. (NYSE:CHPT) stock a Buy rating with a target price of $18. The analyst believes that the corporation has achieved economies of scale that will provide it with operational momentum. Furthermore, ChargePoint Holdings, Inc. (NYSE:CHPT) is shifting its expenditure toward the completion of major hardware related to its L2AC platform, which would further aid the company in achieving its expansion plans. The current stock price provides an attractive entry point for potential investors.
10. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 26
NIO Inc. (NYSE:NIO) is a Hefei, China-based manufacturer of EV sedans and SUVs. The company caters to the need of different types of customers through its diverse range of variants.
On December 15, Edison Yu at Deutsche Bank highlighted NIO Inc. (NYSE:NIO) stock as a short-term buy due to the expected impact of several positive developments in the near future. The analyst highlighted that the weekly registration data was soft, but NIO Inc. (NYSE:NIO) is expected to see an increase in delivery volumes for the rest of the month. Furthermore, on December 24, NIO Inc. (NYSE:NIO) conducted its annual “NIO Day” event and presented the revamped version of ES8 and EC7 SUVs, which investors received positively. Furthermore, the relaxation in China’s zero COVID policy and positive comments by the US audit watchdog about complete inspection access will play in favor of NIO Inc. (NYSE:NIO) stock.
Horos Asset Management shared its outlook on NIO Inc. (NYSE:NIO) in its Q1 2022 investor letter. Here’s what the firm said:
“At the beginning of April the CSRC (China Securities Regulatory Commission) announced possible changes in its regulation that would allow this inspection by foreign auditors, provided that the companies previously communicate to this body the state secrets that would be exposed, as well as the sensitive information that they might have to hand over, and the subsequent audit is carried out in a framework of collaboration with the CSRC. In short, a move in the direction desired by the SEC, although still far from the optimal result, that is, unrestricted access to information. While these negotiations between the two regulatory bodies are progressing, Chinese companies have to decide how best to preserve their interests. Other entities, such as the electric vehicle manufacturer Nio, have just started trading on this stock market.”
9. Alight, Inc. (NYSE:ALIT)
Number of Hedge Fund Holders: 29
Alight, Inc. (NYSE:ALIT) is a Las Vegas, Nevada-based provider of cloud-based human capital solutions related to benefits, HR, and payroll.
Daniel Ives at Wedbush initiated coverage on Alight, Inc. (NYSE:ALIT) stock with a target price of $13, along with an Outperform rating. The update issued on December 9 highlighted that the company has a strong management team with a proven track record of growth under the leadership of CEO Stephan Scholl. The analyst added that Alight, Inc. (NYSE:ALIT) is in a strong position to increase its market share and become one of the leading players in the enterprise resource planning (ERP) universe. Experts believe that Alight, Inc. (NYSE:ALIT) offers growth and profitability together during these uncertain times as it has an average revenue retention rate of 97%, and the company’s recurring revenue stands at 84% as of the third quarter.
As of Q3 2022, Alight, Inc. (NYSE:ALIT) was held by 29 hedge funds.
8. SentinelOne, Inc. (NYSE:S)
Number of Hedge Fund Holders: 30
SentinelOne, Inc. (NYSE:S) is a Mountain View, California-based cybersecurity company. The company has a proprietary Singularity Platform that brings artificial intelligence (AI) into use to detect and respond to external threats.
On December 15, Taz Koujalgi at Wedbush commenced coverage on SentinelOne, Inc. (NYSE:S) stock with a target price of $19 and an Outperform rating. The analyst believes the company has a total addressable market (TAM) of $40 billion in the Security and IT operations segment. SentinelOne, Inc. (NYSE:S) has an annual recurring revenue (ARR) of around $500 million, reflecting a significant growth potential. The analyst noted that the company has been working on improving its margins.
ClearBridge Investments shared its outlook on SentinelOne, Inc. (NYSE:S) in its Q4 2021 investor letter. Here’s what the firm said:
“We added six new positions in the fourth quarter. We see next-generation cybersecurity provider SentinelOne, although early in its growth lifecycle, as capable of taking share from legacy players in the antivirus and broader cybersecurity industry.”
7. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 32
Plug Power Inc. (NASDAQ:PLUG) is a Latham, New York-based zero-emission fuel cell maker and hydrogen fuel provider founded in 1997.
P.J. Juvekar at Citi increased the target price for Plug Power Inc. (NASDAQ:PLUG) from $20 to $21 on December 15. The analyst reiterated a Buy rating on Plug Power Inc. (NASDAQ:PLUG) stock and highlighted that the reopening of the Chinese economy following the reduction in COVID-related restrictions would result in a push toward cyclical stocks. Juvekar highlighted Plug Power Inc. (NASDAQ:PLUG) stock as a defensive name that should be focused upon with an expectation of the hydrogen sector to reach a size of $10 trillion by 2030. Experts forecast Plug Power Inc. (NASDAQ:PLUG) to achieve annual sales of $5 billion by 2026.
D E Shaw raised its stake in Plug Power Inc. (NASDAQ:PLUG) by 64% during Q3 2022.
6. DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 34
DraftKings Inc. (NASDAQ:DKNG) is a Boston, Massachusetts-based sports betting company that also conducts various daily and weekly fantasy sports contests.
The company entered into a multi-year agreement with a subsidiary of Churchill Downs Incorporated (NASDAQ:CHDN) in late November 2022. The agreement will make DraftKings the go-to platform for betting on horse racing across 21 states. This is the first time the company is exploring the avenue of horse race betting, which will further increase the TAM for DraftKings Inc. (NASDAQ:DKNG). Based on this development, Matt Farrell at Piper Sandler gave DraftKings Inc. (NASDAQ:DKNG) stock a target price of $21 along with an Overweight rating. The analyst sees this deal as profitable and expects it to aid DraftKings Inc. (NASDAQ:DKNG) in achieving EBITDA profitability.
Here’s what Baron Funds said about DraftKings Inc. (NASDAQ:DKNG) in its Q4 2021 investor letter:
“Shares of DraftKings, Inc. fell in the quarter, as stocks of online gaming companies were under pressure. Sports betting and i-gaming are rolling out with great fanfare and success across the country; however, investors seem concerned about competition and margins. Most participants are spending heavily on marketing and promotions, which is cutting into margins. We see this as worthy investment in customer acquisition at a moment in time when revenues are just building. We continue to believe that online sports betting and gaming will be enormous industries, that DraftKings will be a leading player. We think the business will have high margins as it matures. We believe we are underwriting the business conservatively and see much upside in the long term.”
In addition to DraftKings Inc. (NASDAQ:DKNG), Alibaba Group Holding Limited (NYSE:BABA), EQT Corporation (NYSE:EQT), and DISH Network Corporation (NASDAQ:DISH) are also some of the best buy-the-dip stocks to buy now.
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Disclosure: None. 11 Best Buy-the-Dip Stocks To Buy Now is originally published on Insider Monkey.
