September has so far been a down market for broader indices. For many investors, this can be concerning, since it is not possible to know whether this is short-term profit taking or the start of increased selling. Navigating through market declines and even crashes is part of the reality of stock-market investing. Therefore, today I will introduce three top stocks to buy if we enter a deeper correction.
Thin summer trading pushed a large number of stocks to new highs. As a result, many portfolios are like to be sitting on some solid gains. Market participants now wonder whether these companies, especially tech shares, have become overvalued.
The rest of 2020 will possibly continue to be choppy. October and November may see further falls in the markets. However, that should not be a reason to panic-sell portfolio holdings. Instead, investors could use such a correction to their advantage by purchasing many top stocks at a discount.
My preference would be to invest in companies that pay robust dividends as well as high-growth tech stocks. Investors who purchase dividend-growth stocks and reinvest the dividends to buy more shares are likely to see considerable growth in their savings.
“U.S. companies still reign supreme when it comes to technology.,” said Mohammad Niamat Elahee, a business professor at Quinnipiac University in Connecticut. “However, the gap between U.S.-based firms and foreign firms have been narrowing over the years.”
Therefore, I’d look to buy solid tech shares for a long-term portfolio. Over the long run, their growth stories will continue successfully.
Against that background, here are three top stocks to buy on any further weakness:
- Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ)
- Campbell Soup (NYSE:CPB)
- AT&T (NYSE:T)
Top Stocks to Buy: Global X Robotics & Artificial Intelligence ETF (BOTZ)
My first choice is actually an exchange-traded fund. When we mention tech stocks, the first names that typically come to mind are Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). The importance of these names in many portfolios as well as daily lives cannot be denied.
Yet, there are many other companies that may pique the interest of investors, especially when it comes to emerging subsectors like robotics, artificial intelligence, industrial robots and autonomous vehicles, such as drones. And that is where the Global X Robotics & Artificial Intelligence ETF comes in, since it focuses on stocks operating in these areas.
The fund, which was launched in 2016, currently invests in 31 global companies. Therefore, investors get exposure to businesses headquartered outside the U.S., as well. Nvidia (NASDAQ:NVDA), Intuitive Surgical (NASDAQ:ISRG), ABB (NYSE:ABB), Fanuc (OTC:FANUY) and Keyence (OTC:KYCCF) are the top five companies, comprising around 40% of the fund.
Net assets are over $1.7 billion. The dividend yield and expense ratio are 0.23% and 0.68% respectively. In terms of country breakdown, Japan tops the list with over 41%. Next is the U.S. (36.4%) and Switzerland (13.3%).
So far in the year, BOTZ is up about 23%. On Sept. 2, it hit an all-time high of $28.13. Its trailing price-earnings ratio of 38x and price-book ratio of 3.4x , coupled with short-term technical analysis, suggest that there may be short-term profit-taking in the fund.
Long-term investors who believe this new decade may be driven by advances in the field, may consider buying the dips, especially if the price goes toward $25.
Campbell Soup (CPB)
On Sept. 3, Camden, New Jersey-based CPB released fiscal Q4 results that beat analysts’ estimates. Revenue of $2.11 billion meant an increase of 18% year-over-year. Adjusted earnings per share of 63 cents was an increase of 50% from the previous year.
The group reports revenue in two segments: Meals & Beverages and Snacks. Both segment’s revenue contribution to the overall picture is quite similar. Finally, net income came at $86 million, a sizable improvement from the net loss of $8 million reported a year ago.
“We continued to invest in our businesses during the quarter as we experienced unprecedented demand for our products and welcomed millions of new households to the Campbell portfolio,” CEO Mark Clouse said. “This quarter … solidified a significantly strengthened foundation that we will build upon going forward as we begin fiscal 2021.”
Since the earnings report, CPB stock has sold off by more than 17%. In fact, investors started hitting the sell button in late August. Currently, the stock is down about 8% for the year hovering at $45. The price supports a dividend yield of slightly over 3%.
Dallas, Texas-based AT&T is a multinational conglomerate with an impressive portfolio and diversified revenue stream. In late July, the company announced Q2 results. Consolidated revenues of $41 billion came below expectations and meant the pandemic hit top-line growth.
On a GAAP basis, net income was $1.2 billion, or 17 cents per share. A year ago, respective numbers were $3.7 billion, or 51 cents per share. Excluding non-recurring items, adjusted earnings came at 83 cents per share, beating estimates.
Although it is a mature company, the diversity of the business is likely to provide the company with growth as well as relatively stable revenue streams for many years into the future. Analysts expect the company to also benefit from developments from the rollout of 5G networks.
Year-to-date, T stock is down over 25%, which technically puts the shares in bear-market territory. The current dividend yield is 7.11%. Forward P/E and P/S stand at 9.17x and 1.2x, respectively.
Passive income seekers are likely to snatch up the shares at every upcoming dip.
On the date of publication, Tezcan Gecgil did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
The author has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. She also publishes educational articles on long-term investing.