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.
Source: pexels
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.”
5. BP p.l.c. (NYSE:BP)
52 Week Range: $32.51 – $40.84
Current Share Price: $32.87
Number of Hedge Fund Holders: 38
Market Capitalization as of September 4: $92.51 Billion
BP p.l.c. (NYSE:BP) is one of the best buy-the-dip stocks to invest in to gain exposure in the energy sector at a time when oil and gas prices are showing signs of edging higher. The integrated oil company produces oil, natural gas, and integrated gas and power; trading of gas; and operation of onshore and offshore wind power.
BP p.l.c. (NYSE:BP) shares are trading near two-year lows, hurt by the company’s shift from the oil and gas business. Even as the company tries to move away from the fossil fuel business, a good chunk of its profits comes from the lucrative business.
It has since increased its forecast for oil and gas demand, indicating that its shift towards renewable energy is decelerating. It anticipates that the oil demand will reach around 97.8 million barrels per day in 2035, according to BP p.l.c. (NYSE:BP)’ s scenario, which reflects the ongoing path of the worldwide energy system. This figure is more than 5 percent higher than the previous year’s estimate, which saw BP reduce its expectations for expanding oil and gas demand.
Even though its profit margins face challenges, the energy company plans to keep returning funds to its investors. It has revealed a fresh $1.75 billion share repurchase program, which is bigger than the $1.5 billion it carried out in the previous quarter.
Additionally, BP p.l.c. (NYSE:BP) is dedicated to investing $3.5 billion in share repurchases for the first six months of this year. In total, the strategy is to invest at least $14 billion in share repurchases over the period of 2024-25.
Late last year, the company hiked its dividend by 10% to 7.27 cents as it continues to return optimum value to shareholders; its dividend yield currently stands at 5.63%. It is one of the best buy dips stocks to invest in as it trades at a discount with a price-to-earnings multiple of 6 compared to the energy sector average P/E of 13.
According to Insider Monkey’s database of Q2 2024, 38 hedge funds held stakes in BP p.l.c. (NYSE:BP), down from 40 in the previous quarter. These stakes have a total value of over $1.48 billion.
4. Dollar General Corporation (NYSE:DG)
52 Week Range: $82.68 – $168.07
Current Share Price: $83.79
Number of Hedge Fund Holders: 42
Market Capitalization as of September 4: $18.42 Billion
Dollar General Corporation (NYSE:DG) is one of the best buy-the-dip stocks to invest in as a consumer defensive investment play. Operating as a discount retailer, it provides consumable products, including paper, cleaning, and food items.
It is one of the retailers that has felt the full wrath of deteriorating economic conditions amid the high interest rates. The company delivered second-quarter results that fell short of expectations, with earnings of $1.70 against the expected $1.79 share. Revenues, on the other hand, totaled $10.21 billion against $10.38 billion expected.
The underperformance came as the discount retailer’s lower-income customers struggled amid the current economic conditions. The retailer is also feeling the pressure as deep-pocketed retailers double down on offering low-priced daily essentials.
Nevertheless, Dollar General Corporation (NYSE:DG) is moving to curb the losses and improve its profit margins by improving its stores and how it handles inventory. The store’s efforts to enhance its appeal are part of its plan to deal with the financial challenges affecting its clientele.
Additionally, Dollar General Corporation (NYSE:DG) is one of the companies well positioned to benefit from the US Federal Reserve cutting interest rates in September and up to 75 basis points by the end of the year. The interest rate cuts are expected to boost liquidity in the market, which should benefit most of its customers, therefore driving sales.
With the retailer trading close to its 52-week lows, it is one of the best buy dips, trading at a discount with a price-to-earnings multiple of 11. Additionally, the company comes with a 2.82% dividend yield for generating some passive income on the side.
In the second quarter, 42 hedge funds included Dollar General Corporation (NYSE:DG) in their 13F filings, with a combined stake value of $1.55 billion.
3. Boeing Co (NYSE:BA)
52 Week Range: $158.30 – $267.54
Current Share Price: $173.74
Number of Hedge Fund Holders: 42
Market Capitalization as of September 4: $99.22 Billion
Boeing Co (NYSE:BA) is one of the best buy-the-dip stocks to invest in for diversifying an investment, not a portfolio, into the industrial sector. The company and its subsidiaries design, develop and sell commercial jetliners, military aircraft, and missile defense systems. Its Global Services segment offers products and services, including supply chain and logistics management, engineering, maintenance and modifications, upgrades, and conversions.
Boeing Co (NYSE:BA) is one of the stocks that has nosedived significantly, presenting a buy-the-dip opportunity. The stock sell-off has come on the core Boeing commercial airplanes segment suffering from ongoing quality management issues associated with the 737 Max. The company has also been forced to ground its 777x fleet over safety issues.
In its quest to enhance quality assurance and guarantee sufficient fuselage supplies, Boeing Co (NYSE:BA) is acquiring Spirit AeroSystems and might need to invest additional funds into Spirit AeroSystems to better its operations.
Amid the safety issues, Boeing is still one of the biggest airplane makers and faces minimal competition in the sector. It is one of the reasons that deliveries have been improving with the narrow body 737 Max attracting 158 orders in the recent quarter. As it stands, Boeing has 4,741 unfilled 737 max orders in its backlog.
In August, the aerospace giant delivered 42 aircraft, keeping pace with its July performance. If Boeing Co (NYSE:BA) continues to achieve this delivery pace through September, the third quarter of 2024 will significantly improve compared to the previous quarter. This forecast highlights a possible upward trend in Boeing’s operational efficiency as it strives to recover from the effects of the pandemic in the aviation sector.
Even though it has encountered obstacles, shown by a pessimistic P/E ratio of -28.19 and a minor drop in revenue by 0.07% in the past year, the company is currently trading close to its lowest point in the past 52 weeks, which could be a chance for long-term investors to purchase shares.
At the end of the second quarter of 2024, 42 out of the 912 hedge funds profiled by Insider Monkey had bought and owned Boeing Co (NYSE:BA) shares.
2. Airbnb, Inc. (NASDAQ:ABNB)
52 Week Range: $110.38 – $170.10
Current Share Price: $114.98
Number of Hedge Fund Holders: 63
Market Capitalization as of September 4: $72.71 Billion
Airbnb, Inc. (NASDAQ:ABNB) is a consumer cyclical company that operates a platform that enables hosts to offer stays and experiences to guests worldwide. It connects hosts and guests online or through mobile devices to book spaces and experiences by offering private rooms, primary homes, and vacation homes. Based in San Francisco, California, Airbnb has transformed the travel sector with its distinctive service that enables people to list and reserve places to stay globally.
Airbnb, Inc. (NASDAQ:ABNB) is maneuvering through a challenging environment as it prepares for anticipated increases in bookings for nights and experiences later in the year. These forecasts are made against the context of tougher comparisons year over year. The focus on experiences by the company is particularly noteworthy, with the impact on profit margins being closely observed.
Airbnb, Inc. (NASDAQ:ABNB) delivered another solid second quarter as revenues rose 11% year over year to$2.75 billion. Net profit came in at $555 million, indicating a net profit margin of 20 percent. The Adjusted EBITDA figure climbed by 9%, leading to an EBITDA Margin of 33 percent. During the quarter, the company produced $1 billion in Free Cash Flow (FCF), taking its total free cash flow to $4.3 billion, a record high.
The strong cash flow allows the company to return value to shareholders by the $749 million spent on buybacks in the quarter. Additionally, the remarkable gross profit margin of 82.86% is a point of interest for investors, highlighting Airbnb’s success in keeping a large share of its earnings as gross profit.
Airbnb, Inc. (NASDAQ:ABNB)’s careful management of finances, evidenced by its higher cash reserves compared to its liabilities on its financial statement and its liquid assets surpassing its immediate financial commitments, points to robust financial health.
In the second quarter of 2024, 63 hedge funds invested in Airbnb, Inc. (NASDAQ:ABNB), with positions worth $2.62 billion. As of June 30, 2024, the company’s biggest shareholder is Renaissance Technologies, and the firm has a position worth $$515.76 million.
Here is what Polen Capital, an investment management company, said about Airbnb, Inc. (NASDAQ:ABNB) in its first-quarter 2024 investor letter:
“During the quarter, we initiated new positions in Sage Group and Airbnb, Inc. (NASDAQ:ABNB) and added to our existing position in Globant.
Airbnb is a great business model, according to our research, due to its two-sided global network effects. For several reasons, Airbnb has a better mousetrap with its supply growth engine, with its hosts having a far lower cost of capital and more flexibility than hotels. We think private rentals should continue to grow their share of overall accommodation stays, potentially up to 30% of lodging or higher over the long term, letting the private rental gross booking value grow at a low double-digit rate. We also think Airbnb should continue to gain share within the private rental market as its global network effects strengthen, allowing for mid-teens revenue growth. With flat to rising margins over time, significant free cash flow generation, and a management team that has demonstrated its owner orientation, this should result in high-teens EPS growth over time. While the path there will not be linear, and it is a more discretionary spending-tied business, we think the long-term secular growth opportunity is very compelling.”
1. Snowflake Inc (NYSE:SNOW)
52 Week Range: $107.93 – $237.72
Current Share Price: $110.41
Number of Hedge Fund Holders: 69
Market Capitalization as of September 4: $37 Billion
Snowflake Inc (NYSE:SNOW) is a leading data storage and sharing company that provides a cloud-based data platform. It provides a Data Cloud service that allows users to gather data into a unified, reliable source, thereby facilitating the generation of significant business insights. Additionally, it utilizes artificial intelligence (AI) to address challenges in business operations.
The company’s competitive edge stems from the fact that it sells data analytics and management software that runs on the cloud computing platforms of some of the biggest companies, including Amazon and Microsoft. The company now has 510 customers with trailing 12-month product revenue greater than $1 million and 736 Forbes Global 2000 customers, representing 28% and 5% year-over-year growth, respectively.
While Snowflake Inc (NYSE:SNOW) has pulled back significantly from its 52-week highs, it is one of the best buy-the-dip stocks to invest in as it has grown its revenues by over $3 billion annually. The company delivered solid second-quarter results, with product revenue increasing 30% yearly to $829.3 million. Total revenue was up 295 to $868.8 million.
Analysts expect the company to keep growing, with a projected 26% increase in revenue for the current fiscal year, with another 23% rise expected in the following year. Snowflake Inc (NYSE:SNOW) has successfully turned a profit and recently introduced a plan to buy back its shares, aiming to distribute earnings back to its investors.
Following an analysis of 912 hedge funds tracked by Insider Monkey, 69 held stakes in Snowflake Inc (NYSE:SNOW) as of the end of the second quarter of 2024.
Here is what Baron Fifth Avenue Growth Fund said about Snowflake Inc. (NYSE:SNOW) in its Q2 2024 investor letter:
“Snowflake Inc. (NYSE:SNOW) is a leading cloud data platform that is predominantly used for data analytics. The stock declined 16.4% as investors evaluated the impact of a recently announced CEO transition, an investment cycle driven by spend on AI, a cybersecurity incident, and a rapidly changing competitive environment. With GenAI capturing a larger portion of the public discourse, Snowflake’s positioning in the future data stack is under scrutiny by both investors and customers. We believe Sridhar Ramaswamy, the newly appointed CEO, can help the business more efficiently transition toward an AI-first world. While Databricks and other key competitors are presenting strong results, we believe Snowflake’s brand, existing customer base, and accelerating product innovation should allow it to continue to capture share in a relatively large and strategic market. Management continues to describe strong demand trends for its core data analytics, which is also demonstrated by the relatively healthy expansion rates among existing customers while new go-to-market initiatives can help grow the customer base further. Longer term, we remain excited about the Snowflake’s strategic opportunity as the data platform for its customers.”
The best buy-the-dip stocks to invest in are companies trading at discounted valuations with tremendous upside potential. However, given that the artificial intelligence arms race is just but starting, there are under-the-radar AI stocks trading at highly discounted valuations that hold greater promise for anyone looking to diversify their portfolio. If you are looking for an AI stock that is more promising than the top activist investment plays, check out our report about the cheapest AI stock.
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