In this article, we will take a look at the 12 best buy-the-dip stocks to buy now. To see more such companies, go directly to 5 Best Buy-the-Dip Stocks To Buy Now.
Investors are processing economic data and mixed signals on the state of the markets as the Federal Reserve continues to hold back on further interest rate hikes while saying categorically that it won’t hesitate to raise interest rates if needed. However, some analysts believe the Fed won’t raise interest rates amid the upcoming election year to make sure it doesn’t tip the economy into a recession. A Bloomberg report recently said markets now expect a 92 basis points of rate cuts next year, compared with Fed officials’ estimate of a half a point of easing for 2024. The Bloomberg report quoted Deutsche Bank macro strategist Henry Allen, who said that the Fed’s dovish pivot might create another problem that could result in the Fed having to make a hawkish pivot. The analyst said that expectations of a pivot “can actually make one less likely, since it eases financial conditions that central banks then feel the need to tighten again in order to bring down inflation.” Allen said that back in March, Treasury yields fell when investors thought the Fed would pause rate hikes and also cut rates after a crisis jolted the banking industry. But the Fed instead facilitated banks and kept on increasing interest rates. The Bloomberg report also highlighted that Jerome Powell has emphasized that the Federal Reserve is ready to keep raising interest rates if needed. There are several other senior officials at the central bank who have hinted at the body’s approach to avoid making unnecessary pivots. For example, Fed Governor Michelle Bowman reportedly have said that further rates hikes could be necessary. The Fed Bank of Chicago President Austan Goolsbee is also reported to have said that the central bank does not want to “pre-commit” to decisions on rates.
Recession Fears Reemerge
However, Allen said that a pivot, when it comes, happens suddenly and a rise in unemployment or any other negative economic data points could increase the chances of the Fed making the so-called dovish pivot.
When 2023 started there was a lot of hue and cry about recession. As AI-rally fueled tech stocks and broader indices jumped, bears went into hiding and bulls prevailed. However, recession calls are now emerging again. Academy Securities’ Peter Tchir recently said that by the end of this year we might be again talking about hard landing and “we’ll be the boy that cried wolf, and we’ll all be back talking no more soft landing, we’ve overdone it.”
Roth MKM’s Michael Darda is also expecting a recession amid rising joblessness. The analyst, according to Bloomberg, said that whenever the US economy sees half a percentage point rise in joblessness, a recession follows. In October, unemployment was 3.9%, much higher than 3.4% recorded in January.
In this backdrop it makes sense to see which stocks are trading near lows with long-term growth catalysts. Smart money investors are long these stocks and these companies might gain once the dark clouds over the economy begin to fade.
Our Methodology
For this article we first used a stock screener to identify stocks that fell to near or to new 52-week lows over the past 45 days. From these stocks we picked 12 stocks with the highest number of hedge fund investors.
Best Buy-the-Dip Stocks To Buy Now
12. PNM Resources, Inc. (NYSE:PNM)
Number of Hedge Fund Holders: 41
Electricity services company PNM Resources, Inc. (NYSE:PNM) ranks 12th in our list of the best buy-the-dip stocks according to hedge funds.
In September, Mizuho upgraded PNM Resources, Inc. (NYSE:PNM) to Buy from Neutral with a $50.30 price target. The firm at the time said that PNM-Avangrid (AGR) merger will go through despite a push by New Mexico regulators to block the deal.
As of the close of the second quarter of 2023, 41 hedge funds in Insider Monkey’s database of 910 funds were long PNM Resources, Inc. (NYSE:PNM). The biggest stakeholder of PNM Resources, Inc. (NYSE:PNM) was Alec Litowitz and Ross Laser’s Magnetar Capital which owns an $89 million stake in the company.
11. The Estee Lauder Companies Inc. (NYSE:EL)
Number of Hedge Fund Holders: 44
The Estee Lauder Companies Inc. (NYSE:EL) recently posted fiscal Q1 results. Adjusted EPS in the period came in at $0.11 surpassing estimates by $0.31. Revenue however fell a whopping 10.6% on a YoY basis to $3.52 billion, missing estimates by $30 million. The Estee Lauder Companies Inc. (NYSE:EL) also lowered its outlook to reflect a slower recovery in net sales.
A total of 44 hedge funds tracked by Insider Monkey had stakes in The Estee Lauder Companies Inc. (NYSE:EL) as of the end of the June quarter.
Artisan Developing World Fund made the following comment about The Estée Lauder Companies Inc. (NYSE:EL) in its Q3 2023 investor letter:
“Bottom contributors to performance for the quarter included global beauty product company The Estée Lauder Companies Inc. (NYSE:EL). Estee Lauder fell due to ongoing inventory destocking in Asian retail travel and recent Chinese government actions targeted at the daigou channel, both of which impacted retail sales in the Hainan duty-free channel.”
10. Corteva, Inc. (NYSE:CTVA)
Number of Hedge Fund Holders: 46
Agricultural chemical company Corteva, Inc. (NYSE:CTVA) ranks 10th in our list of the best buy-the-dip stocks to buy according to hedge funds. Corteva, Inc. (NYSE:CTVA) has lost about 18% year to date through November 2.
Deutsche Bank added Corteva, Inc. (NYSE:CTVA) stock in its list of stocks with “catalyst call” with a Buy rating. Analysts at the bank said investor sentiment for Corteva, Inc. (NYSE:CTVA) could improve following the company’s earnings that are slated to be announced on November 8.
As of the end of the second quarter of 2023, 46 hedge funds tracked by Insider Monkey had stakes in Corteva, Inc. (NYSE:CTVA). The biggest stakeholder of the firm was Ken Griffin’s Citadel Investment Group which owns a $323 million stake in Corteva, Inc. (NYSE:CTVA).
Oakmark Fund made the following comment about Corteva, Inc. (NYSE:CTVA) in its Q3 2023 investor letter:
“Corteva, Inc. (NYSE:CTVA) is a leading provider of seed and crop protection chemicals. We believe the seed and crop protection markets have sizeable barriers to entry due to the duration and magnitude of investment required to compete. Both industries require constant innovation: Farmers expect seed yield improvement each year while nature develops immunity to crop protection chemicals over time. As a result, advantages accrue to the largest players with the most R&D resources. Within this context, we believe Corteva is very well positioned. The company has scale, well-recognized brands, a loyal customer base, and a promising R&D pipeline. In addition, we see idiosyncratic opportunities for Corteva to improve its profitability over time, and we believe the current management team is executing well against this opportunity. More recently, the stock has been pressured by near-term headwinds related to inventory destocking and declining crop prices. We see this weakness as an opportunity to invest in a high-quality and defensible business at a discount to both its own historical trading multiple and private market transactions.”
9. Prologis Inc. (NYSE:PLD)
Number of Hedge Fund Holders: 50
Record-high mortgage rates and overall uncertainty in the housing market is weighing on housing stocks and Prologis Inc. (NYSE:PLD) felt the heat of this phenomenon in October as its stock fell. Prologis Inc. (NYSE:PLD) has lost about 4.8% over the past one year. Last month the company also posted third quarter results. FFO in the period totaled $1.30, beating estimates by $0.05. Revenue jumped 9.7% year over year to $1.92 billion, surpassing estimates by $180 million. For 2023 Prologis Inc. (NYSE:PLD) raised its core FFO guidance from $5.56-$5.60 to $5.58-$5.60 vs $5.59 consensus.
As of the end of the second quarter of 2023, 50 hedge funds out of the 910 funds in Insider Monkey’s database had stakes in Prologis Inc. (NYSE:PLD). The biggest stakeholder of the company was
Here is what Baron Real Estate Income Fund has to say about Prologis, Inc. (NYSE:PLD) in its Q2 2023 investor letter:
“The shares of Prologis, Inc., the world’s largest industrial REIT, declined in the third quarter of 2023 along with most REITs. We are big fans of CEO Hamid Moghadam and Prologis’ management team, and we remain optimistic about the company’s long-term growth outlook.
Prologis owns a high-quality real estate portfolio that is concentrated in major global trade markets and large population centers across the Americas, Europe, and Asia. Prologis has an unmatched global platform, strong competitive advantages (scale, data, and technology), and attractive embedded growth prospects. The company is the only industrial REIT with an A credit rating.
We continue to believe the appreciation potential for Prologis shares remains compelling given that the company’s rents on its in-place leases are more than 65% below current market rents, thus providing a strong runway for growth in the next three to five years.”
8. Delta Air Lines, Inc. (NYSE:DAL)
Number of Hedge Fund Holders: 56
Delta Air Lines, Inc. (NYSE:DAL) stock came close to its 52-week lows last month. Delta Air Lines, Inc. (NYSE:DAL) however posted strong third quarter earnings amid rising travel demand. Delta’s management talked about 2023 guidance and future outlook in its Q3 earnings call and said:
“We expect our December quarter revenues to be 10% higher than 2022, with a 10% operating margin and earnings of over $1 per share. This brings our expectation for full year earnings to over $6 per share on a double-digit operating margin and free cash flow of $2 billion. Since raising full year guidance over the summer, our revenue outlook has improved, though earnings and cash flow have been impacted by higher fuel and maintenance costs. Revenue for the full year is expected to increase 20% over last year, which was the high-end of our expectations on steady domestic demand and continued strength in international. With strong top line growth and margin expansion, we expect to double earnings year-over-year and deliver a 13% return on invested capital.
Our outlook for 2023 keeps revenue, earnings, cash flow and debt reduction on track with our three-year plan, which we issued in December of ’21. As we progress through the recovery, we have made meaningful investments in operational reliability and our people. Delta has led the industry in setting the bar for wages, including a new pilot deal and profit sharing.”
Read the full earnings call transcript here.
Patient Capital Management made the following comment about Delta Air Lines, Inc. (NYSE:DAL) in its Q3 2023 investor letter:
“Airlines returned to trough multiples as higher oil prices pressured costs. Historically, airlines have passed these costs on to customers. We think Delta Air Lines, Inc. (NYSE:DAL) is a premium brand valued like its economics aren’t sustainable. With mid-teens returns on capital, significant free cash flow generation, excellent capital allocation and long-term earnings per share growth in the high-single to low-double-digits, we think the company is significantly mispriced.
Delta Air Lines Inc. (DAL) reversed course in the third quarter, falling 24% from its highs in July. The airlines in general were hurt from rising commodity prices that are leading to increased cost per available seat mile (CASM). Historically, airlines have passed on higher fuel prices to customers with a lag. We see Delta as a premium global consumer brand that is materially misunderstood by the market. The market still sees airlines as a cyclical, bankruptcy prone industry. An improved supply-demand picture, management discipline and a better business mix make Delta a more resilient business. Their loyalty program with American Express is a source of stable and growing revenues with $6.5B in remunerations this year with a goal of reaching $10B by the end of the contract in 2028. Premium and ancillary service revenue should generate 65-70% of the total in the next year or two. The company should continue to generate consistent mid-teens returns on capital. As the market begins to understand, we believe the company will continue to be rewarded. On top of this, free cash flow is expected to expand generating a cumulative ~$11B from ’23-’25, or one-half of its current market cap. As the company pays down debt while growing the dividend and eventually resuming share repurchases, we think the stock will continue to trend higher.”
7. Bristol Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 66
Bristol-Myers Squibb Co (NYSE:BMY) stock has declined about 29% year to date through November 2. While Bristol Myers Squibb Company (NYSE:BMY)’s Q3 GAAP EPS beat estimates, its revenue in the period declined yet again, for the fifth consecutive quarter amid the company’s loss of exclusivity for its blockbuster multiple myeloma therapy Revlimid.
Bristol Myers Squibb Company (NYSE:BMY) was one of the stocks in the list of oversold dividend stocks compiled by BMO Capital Markets.
A total of 66 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Bristol Myers Squibb Company (NYSE:BMY). The biggest stakeholder of Bristol Myers Squibb Company (NYSE:BMY) was Richard S. Pzena’s Pzena Investment Management which owns a $278 million stake in the company.
Madison Sustainable Equity Fund made the following comment about Bristol-Myers Squibb Company (NYSE:BMY) in its Q3 2023 investor letter:
“During the quarter, we sold our positions in Bristol-Myers Squibb Company (NYSE:BMY) and The Walt Disney Company. We added Texas Instruments as a new position. Bristol-Myers has been dealing with the loss of exclusivity for Revlimid, one of its key products. Although the company is launching new drugs in melanoma, heart failure, and psoriasis it will need additional products to offset the lower revenue in Revlimid.”
6. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 68
The Home Depot, Inc. (NYSE:HD) ranks 6th in our list of the best buy-the-dip stocks according to smart money investors. The Home Depot, Inc. (NYSE:HD) recently beat fiscal Q2 earnings estimates. However, The Home Depot, Inc. (NYSE:HD)’s comp. sales fell 2.0%, still beating estimates for a 4.1% decline. Interestingly, The Home Depot, Inc. (NYSE:HD) was one of the stocks recommended by ChatGPT when we asked the AI chatbot to act as a stock advisor and recommend stocks for long-term gains.
Insider Monkey’s database of 910 hedge funds shows that 68 hedge funds out of the 910 funds were long The Home Depot, Inc. (NYSE:HD) as of the end of the June quarter. The most significant stakeholder of The Home Depot, Inc. (NYSE:HD) was Israel Englander’s Millennium Management which owns a $561 million stake in the company.
Madison Sustainable Equity Fund made the following comment about The Home Depot, Inc. (NYSE:HD) in its Q3 2023 investor letter:
“We updated the sustainable scorecard for The Home Depot, Inc. (NYSE:HD) and maintained our Above Average Rating. Home Depot’s corporate responsibilities focus on three pillars: focusing on its people, operating sustainably, and strengthening its communities. Home Depot continues to focus on its people by investing billions of dollars in wages, training, and benefit enhancement. The company’s environmental targets include the reduction of direct (Scope 1) and indirect (Scope 2) emissions by 42% by 2030, as well as a 25% decrease in emissions related to the “use of products sold” (Scope 3 emissions). Both targets are from a 2020 base year.
Separately, The Home Depot Foundation announced that it will invest $6 million in skilled trades training to address the 400,000 job openings across the construction industry. This grant launches a new program that will provide free, skilled trades training and scholarships for veterans and military families.”
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Disclosure: None. 12 Best Buy-the-Dip Stocks To Buy Now is originally published on Insider Monkey.
