In this article, we will take a detailed look at 7 best buy-the-dip stocks to invest In.
It’s every investor’s goal to buy a stock well poised to beat the average return of market indexes. However, with valuations getting out of hand after one of the longest bull runs, very few stocks offer significant upside potential. Nevertheless, some stocks have been battered by deteriorating economic conditions fueled by higher for longer rates.
While it might seem too late to buy stocks with major indices led by the Nasdaq 100 and S&P 500 flirting with record highs, there are still stocks that have been left out from the rallies. Buying the dip is a proven strategy for risk-tolerant investors who are always looking to take action during market downturns.
READ ALSO: 7 Best Beaten Down Stocks to Invest In and Billionaire Carl Icahn’s Top 10 Stocks.
The strategy allows one to buy low when fear has taken over after a deep pullback. It is particularly an effective investment strategy for long-term investors looking to hold stakes in quality stocks for the long haul.
As depicted by the Institute for Supply Management, manufacturing production in the biggest economy slowing down in August is the latest sign that all is not well. Disappointing data with ISM dropping to 47.2 from 48 is the latest sign of slowing growth within the US economy.
According to Larry Tentarelli, chief technical strategist at the Blue Chip Trend Report, the market is expected to be choppy and volatile as it has become data-dependent. Consequently, now would be the best time to be highly cautious, focusing on high-value targets trading at discounted valuations.
On the other hand, Fundstrat’s head of strategy, Mark Newton, believes the market is flashing a handful of signs that there is more upside on the way even as the major indices remain at record highs. According to the analyst, any tech-driven stock pullback presents an ideal buy opportunity on the dip. According to the equity analyst, looking to buy dips makes sense technically, especially for small-cap stocks that look appealing after their recent slide.
The deep pullback in some stocks amid growing concerns about the health of the US economy presents one of the best opportunities to buy the dip of quality stocks trading at discounted valuations. Growth stocks are some of the best, given their track record in outperforming the market.
Certain high-value stocks that have traditionally been steady have recently suffered due to a mix of increasing inflation and high interest rates. In a similar vein, in 2024, there was a shift among investors from big tech firms to smaller, more volatile stocks. Spotting these declines could offer a chance to invest in major companies trading at discounted valuations.
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Our Methodology
To make our list of the best buy-the-dip stocks to invest in, we first made a list of stocks in various industries that are trading near their 52-week lows or have pulled back significantly from their 52-week highs. We checked the hedge fund sentiment around 15 stocks with the largest market caps and then selected the 7 stocks that were the most popular among hedge funds. We then ranked the stocks in ascending order based on the number of hedge funds that hold stakes. Our list contains some of the highest quality companies in different industries including mining, energy, consumer staples, retail, aerospace, tech, and more.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Buy-the-Dip Stocks to Invest In
7. BHP Group (NYSE:BHP)
52 Week Range: $51.73 – $69.11
Current Share Price: $52.34
Number of Hedge Fund Holders: 22
Market Capitalization as of September 4: $136.36 Billion
BHP Group (NYSE:BHP) is a resources company that mines copper, uranium, gold, zinc, and silver, among other metals. In addition, it provides towing, freight, marketing and trading, marketing support, finance, administrative, and other services.
It is one of the stocks trading on the dip, having come under pressure following the collapse of its plan to acquire Anglo-American for $43 billion. Given its higher-margin cash-generative assets, the acquisition was expected to strengthen its growth metrics. Additionally, BHP Group (NYSE:BHP) has suffered following the drop in iron ore from $140 per ton to below $100 per ton.
Amid the headwinds, the company has remained afloat, as depicted by its solid financial results. The mining giant delivered $55.7 billion in revenue for the entire year, which ended June 30. Its attributable profit rose 2% to $13.7 billion.
BHP Group (NYSE:BHP) achieved record production levels at its Western Australia Iron Ore operations, solidifying its position as the leading iron ore producer at the lowest cost globally. Copper production increased 9% for the second year in a row, with an expectation of adding another 4% in the fiscal year 2025.
The impressive performance, backed by a strong financial position, led the company to a final dividend of 74 US cents per share, maintaining a payout ratio of 53%, which aligns with its history of providing strong returns to shareholders throughout various market conditions.
BHP Group (NYSE:BHP) ‘s long-term outlook remains positive, especially on iron ore prices recovering amid strong demand from China. Additionally, the company is aiming for the right moves in diversifying its commodity portfolio into copper to reduce reliance on Iron ore.
Additionally, BHP Group (NYSE:BHP) is one of the best buy-dip stocks to invest in, as its shares have a dividend yield of 5.30%, which is perfect for generating some passive income. After the deep pullback, the stock trades at a discount with a price-to-earnings multiple of 9.
In the second quarter, 22 hedge funds held stakes in BHP Group (NYSE:BHP), totaling $1.25 billion. Fisher Asset Management emerged as the largest shareholder, with a stake valued at $1.21 billion as of June 30.
6. Celsius Holdings, Inc. (NASDAQ:CELH)
52 Week Range: $36.17 – $99.62
Current Share Price: $36.64
Number of Hedge Fund Holders: 27
Market Capitalization as of September 4: $8.54 Billion
Celsius Holdings, Inc. (NASDAQ:CELH) operates in the consumer staples sector, specializing in developing, marketing, and selling functional energy drinks and other liquid supplements. It’s particularly recognized for its popular sugar-free energy drinks that have rapidly gained market share. Additionally, it offers a range of other health-oriented drinks and nutritional supplements.
Over the last few years, Celsius Holdings, Inc. (NASDAQ:CELH) has significantly expanded its reach, evolving from a local brand to a national sensation. In particular, its sales have increased from $75 million in 2019 to $1.3 billion in the previous year. However, this growth rate has decreased this year, with analysts predicting a more subdued 18% increase in the coming years.
Celsius Holdings, Inc. (NASDAQ:CELH) stock has experienced a 60% decline due to this slowdown in revenue growth. This response appears excessive. With plans for global expansion, Celsius stands a strong chance of experiencing further growth in the future.
The company is also pursuing key projects to drive expansion and boost its market presence. The firm’s consistent research and development investments, as well as its brand and advertising, show its commitment to improving its competitive edge. By regularly launching new varieties and compositions, Celsius Holdings, Inc. (NASDAQ:CELH) is adapting to changing tastes among consumers to reclaim its position in the market.
Additionally, it has secured significant shelf space in major supermarkets, convenience stores, and e-commerce sites, greatly broadening its market access. Collaborations with top suppliers and sellers, including Walmart, Target, and Amazon, have given it a solid foundation.
Celsius Holdings, Inc. (NASDAQ:CELH) is also making significant efforts to grow its presence in the energy drink industry. Its strategy to diversify its product range and explore new markets indicates a forward-thinking approach to increasing its customer base. This strategic move could lead to new sources of income and reduce dependence on the North American market.
As of Q2 2024, 27 hedge funds tracked by Insider Monkey owned Celsius Holdings, Inc. (NASDAQ:CELH) shares valued at $192.69 million.
In its Q2 2024 investor letter, the Alger Small Cap Growth Fund commented on Celsius Holdings, Inc. (NASDAQ:CELH) as follows:
“Celsius Holdings, Inc. (NASDAQ:CELH) engages in the development, marketing, sale, and distribution of functional drinks and liquid supplements. It also offers post-workout functional energy drinks and protein bars. During the quarter, shares detracted from performance after the company reported fiscal first quarter revenues below analyst estimates. The revenue shortfall was attributed to ongoing inventory management challenges with PepsiCo, which decelerated year-over-year revenue growth from over 100% to approximately 37%. Despite the near-term growth slowdown, we believe Celsius remains well positioned to potentially capture market share within the large energy and soft drink industry over the long-term.”