September and October are historically tough months for equities and 2021 is proving no different. For instance, September meant the worst performance for the S&P 500 since the height of the pandemic. Over the past month, the Nasdaq 100, Dow Jones Industrial Average and S&P 500 are down about 3%, 0.30% and 1.1%, respectively. But that’s not the only thing affecting what stocks to buy.
In addition to a tough season, investors are concerned over a potential debt crisis in China due to the struggling property developer Evergrande (OTCMKTS:EGRNY). That has added to growing worldwide worries over increased levels of inflation. Plus, there are worries about the effect of the Covid-19 delta variant.
Wall Street has also been increasingly spooked by uncertainty around the U.S. debt ceiling. In recent days, the Senate has temporarily raised the nation’s debt limit. However, question marks still loom. For instance, Reuters reported that many analysts are debating whether now would be an opportune time to buy the dip.
Still, while these issues have led to significant volatility in equities, the recent declines in price for many Street darlings have made them much more affordable for buy-and-hold investors. So, without further ado, here seven of the best stocks to buy on the dip this October:
- Activision Blizzard (NASDAQ:ATVI)
- First Majestic Silver (NYSE:AG)
- Icad (NASDAQ:ICAD)
- Lam Research (NASDAQ:LRCX)
- Micron (NASDAQ:MU)
- Palantir (NYSE:PLTR)
- Sierra Wireless (NASDAQ:SWIR)
Stocks to Buy: Activision Blizzard (ATVI)
52-week range: $71.19 – $104.53
Dividend yield: 0.62%
First up on this list of stocks to buy, Activision Blizzard is one of the most important publishers of interactive entertainment content out there. The company creates and distributes content and services across multiple gaming platforms.
Management issued second-quarter results back in early August. For the period, revenue went up by about 19% year-over-year (YOY) to $2.3 billion. Additionally, net income came in at $876 million, or $1.12 per diluted share, compared with a net income of $580 million (75 cents per diluted share) in the prior-year quarter. Cash and equivalents ended the quarter at $9.2 billion. Finally, the company generated a non-GAAP free cash flow (FCF) of $374 million, down 50% YOY. On the results, CEO Bobby Kotick remarked:
“With respect to our financial performance, we are pleased that the company continued to deliver strong results in the second quarter, and we are raising our outlook for the year.”
Thanks to the rapid growth of interactive entertainment, the video game industry has seen significant gains over the past decade. However, analysts now forecast slowing growth in the near term as the pandemic-induced momentum in player engagement fades. After a 32% YOY increase in 2020 bookings, Activision anticipates growth to slow this year.
On top of this, back in July, California’s Department of Fair Employment and Housing (DFEH) filed a lawsuit against the company. The accusations center around gender discrimination and sexual harassment issues within ATVI. Later, in September, Wall Street learned that Activision settled another similar lawsuit with the U.S. Equal Employment Opportunity Commission (EEOC), a federal agency. It is not yet clear how this settlement could affect the outcome of the DFEH lawsuit. However, investors have not been pleased with these allegations.
That said, ATVI stock is currently down roughly 26% from its 52-week high. It trades around $77, down 17% year-to-date (YTD). This dip could be a good opportunity to buy a leading video game stock prior to several major game releases. Shares are currently trading at 19.75 times forward earnings and 6.52 times trailing sales.
First Majestic Silver (AG)
52-week range: $9.62 – $24.01
Dividend yield: 0.09%
Next up on this list of stocks to buy, Canadian miner First Majestic Silver mainly focuses on silver production in Mexico, with the majority of its revenues coming from silver. The company operates three key silver mines in Mexico as well as another one in Nevada.
Management released Q2 results in mid-August. For the period, total revenue increased more than 340% YOY to a record of $154.8 million, fueled by its recently acquired Jerritt Canyon Mine in Nevada. What’s more, net earnings came in at $15.6 million, or 6 cents per diluted share, compared to a net loss of roughly $10 million (a loss of 5 cents per diluted share) in the previous year. Lastly, cash and equivalents ended the quarter at $227 million. On the results, CEO Keith Neumeyer remarked:
“Improved production rates and higher metal prices during the quarter generated record revenues for the business […] As a result of the higher revenues, our quarterly dividend increased by approximately 33% when compared to the prior quarterly payment.”
Silver often performs well when the economy is in recovery mode. So, if global demand for goods picks up further in the coming quarters, First Majestic could be well-positioned to benefit from the rising value of the metal.
This miner anticipates solid production growth in 2021, but margins are expected to decline in the near term due to rising costs and capital expenditures. AG stock currently trades a bit above $12, down roughly 7% so far this year. According to Seeking Alpha, shares are trading at 50.88 times forward earnings and 5.54 times trailing sales.
Stocks to Buy: Icad (ICAD)
52-week range: $8.73 – $21.44
A manufacturer of medical devices, Icad uses artificial intelligence (AI) technology to improve both the detection and treatment of various cancers. Specifically, the company offers computer-aided detection and workflow solutions for breast, prostate and colorectal cancers.
Like other stocks to buy on this list, Icad released Q2 results back in early August. Revenue surged about 39% YOY to $7.8 million. Additionally, non-GAAP net loss came in at $2.8 million, or 11 cents per diluted share. That’s compared with a non-GAAP net loss of $2.5 million (a loss of 12 cents per diluted share) for the prior-year period. Lastly, cash and equivalents ended the quarter at $37.9 million. After the announcement, CEO Mike Klein noted the following:
“Our second quarter total revenue was negatively impacted by longer than expected Enterprise sales cycles in several large prospective accounts.”
This group is currently developing a series of imaging and radiation application devices to achieve more targeted treatment of various cancers. Right now, ICAD stocks hovers at slightly below $11, down some 50% from the 52-week high. Shares are also down 19% YTD and trade at 7.4 times trailing 12-month (TTM) sales. With its emphasis on innovative medical solutions, interested readers may want to do further due diligence on the company.
Lam Research (LRCX)
52-week range: $333.31 – $673.80
Dividend yield: 1.10%
LRCX stock is the next pick of the stocks to buy on this list. A semiconductor manufacturing equipment supplier, Lam Research is well known among chip investors as a leading producer of etch and deposition machines, critical for producing leading-edge chips. Its tools are used for advanced DRAM and 3D NAND flash storage.
Back in late July, Lam Research announced Q2 2021 results. For the period, revenue increased nearly 49% YOY to $4.15 billion. Additionally, GAAP net income surged 64% YOY to $1.14 billion, or $7.98 per diluted share. Additionally, cash and short-term investments remained flat at $6 billion. On the metrics, CEO Tim Archer commented the following:
“Lam continued its record performance in the June quarter, capping a fiscal 2021 with more than 45% revenue growth and an increase of over 70% in earnings per share.”
Leading-edge chips are increasingly used in numerous applications and industries. As a result, the semiconductor industry is shifting from a cyclical business to a steady growth industry. For instance, analysts expect 5G to provide a significant tailwind for top-line growth. This is because emerging 5G technologies require advanced chips in high-end smartphones and data centers. Therefore, Lam’s equipment will stay in high demand.
The manufacturer also just raised its dividend 15% in August. LRCX stock now yields 1.1% and hovers above $560. It’s up almost 20% YTD but is still 16% lower than its 52-week high. Shares trade at about 16 times forward earnings and 5.3 times trailing sales.
Stocks to Buy: Micron (MU)
52-week range: $49.30 – $96.96
Dividend yield: 0.15%
Another chip darling on this list of stocks to buy, Micron Technology, manufactures high-performance DRAM, NAND and NOR memory and storage products used in PCs, data centers, smartphones, game consoles and automotive, among other electronic applications.
Micron announced Q4 fiscal 2021 results back in late September. For the quarter, revenue surged over 36% YOY to $8.27 billion. The company also generated a non-GAAP net income of $2.78 billion, or $2.42 per diluted share. That’s compared to $1.23 billion, or $1.08 per diluted share, in the prior-year quarter. Finally, adjusted FCF stood at $1.88 billion while cash and equivalents ended the period at $7.8 billion. CEO Sanjay Mehrotra remarked the following on the results:
“Micron’s outstanding fourth quarter execution capped a year of several key milestones […] In fiscal 2021, we established DRAM and NAND technology leadership, drove record revenues across multiple markets, and initiated a quarterly dividend.”
In particular, management highlighted that the semiconductor shortage could persist through 2022. The recent price decline in tech shares has also affected MU stock, which has lost about 30% from the all-time high. Currently, the stock changes hands around $70, down nearly 10% YTD. Shares also trade at only 7.2 times forward earnings and 2.7 times sales. Interested readers could find value around these levels.
52-week range: $9.18 – $45
Palantir Technologies is one of the leading players in the data mining, analytics and security space. Through its platform, clients can analyze large amounts of data and drive operational outcomes. Its products also help governments and enterprises secure access to sensitive data.
Like others in this article, Palantir announced Q2 results in mid-August. Total revenue surged 49% YOY to $376 million for the period. What’s more, while GAAP net loss increased over 25% to $138.6 million, Palantir was still profitable on an adjusted basis, posting adjusted earnings per share (EPS) of 4 cents. Adjusted FCF came in at $50 million as well. Finally, cash and equivalents ended the period at around $2.4 billion.
This company operates two primary platforms: Gotham and Foundry. Gotham serves government agencies, particularly ones in the defense and intelligence sectors. Meanwhile, commercial clients rely on the Foundry platform.
Wall Street believes Palantir could be well-positioned to benefit from the tremendous growth in “Big Data.” The company anticipates its market opportunity at $119 billion and predicts revenue growth of at least 30% annually through 2025.
PLTR stock has gained 160% over the past one year. During the meme-stock frenzy in January, it skyrocketed to $45 per share. Yet, it’s currently down about 45% from its peak, hovering under $25 territory. This pick of the stocks to buy is currently trading at 29 times TTM sales.
Stocks to Buy: Sierra Wireless (SWIR)
52-week range: $10.45 – $22.22
Our last pick on this list of stocks to buy is Canada-based Sierra Wireless, a wireless networking equipment manufacturer focusing on Device-to-Cloud Internet-of-Things (IoT) solutions. The company’s products and services include machine-to-machine communications equipment, high-speed cellular modules, connectivity services, cloud platforms and cellular gateways.
Sierra Wireless released Q2 results back in mid-August. Revenue increased 19% YOY to $132.8 million, easily exceeding the higher end of its sales guidance. Moreover, adjusted net loss declined to $1.1 million, or 3 cents loss per share, compared to an adjusted net loss of $13 million (36 cents per share) in the prior-year quarter. Finally, cash and equivalents ended the quarter at $118.4 million. On the metrics, CEO Phil Brace remarked:
“Revenue in the Second Quarter improved year over year and sequentially, non-GAAP operating expenses remained flat with the prior quarter, and Adjusted EBITDA improved.”
With its focus on machine-to-machine communications, Sierra’s product line has been particularly relevant to IoT applications. For instance, its 5G products provide solutions for increased IoT connectivity. In addition, Sierra has introduced the first multi-network 5G-capable vehicle router, an essential step for the future of the automotive industry.
SWIR stock recently declined after failing to provide near-term guidance due to “production interruptions [from] COVID-19 cases at a contract manufacturing facility in Vietnam.” The stock hovers at slightly below $16 and is up more than 8% YTD. What’s more, SWIR trades at only 1.2 times trailing sales. Given its vast addressable market and depressed price, long-term investors might consider buying the dip in these shares.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil 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.