The stock market has been under some intense selling pressure lately, and there’s no telling when or if it will let up anytime soon. While that has investors looking for some safety, it has others looking for stocks to buy.
The brutal, yet truthful silver lining to these big stock market pullbacks is that it creates great dip-buying opportunities.
When you separate the companies from the market — in essence, looking at them as businesses vs. a component to the indices — it becomes a much more attractive proposition.
We can look at a business and determine whether the current discount from its recent high is enough of a catalyst to start a position. In some cases, the answer is no. Either the discount isn’t big enough or the quality of the business isn’t good enough (or both).
But sometimes, the answer is yes. So, in those cases, let’s look at a few stocks to buy after the recent market selloff.
- Nvidia (NASDAQ:NVDA)
- Advanced Micro Devices (NASDAQ:AMD)
- Exxon Mobil (NYSE:XOM)
- Nike (NYSE:NKE)
- Lululemon Athletica (NASDAQ:LULU)
- Roku (NASDAQ:ROKU)
- The Trade Desk (NASDAQ:TTD)
Now, let dive in and analyze each one.
Stocks to Buy on the Dip: Nvidia (NVDA)
I recently wrote about Nvidia amid the recent selloff, because it’s such a high-quality holding. Clearly, though, that has not kept the stock out of trouble. Meanwhile, the S&P 500 and Nasdaq suffered peak-to-trough declines of roughly 12.5% and 18.5%, respectively.
While the indices were getting steamrolled, so too was Nvidia. Shares suffered a 34.3% decline from recent highs, which thrust Nvidia stock firmly into bear-market territory. For a stock that was booming to new all-time highs just a few months ago, a bear market is not exactly what bulls were expecting.
Particularly for such a high-quality asset.
Overall, the reason I love Nvidia is simple. Even though the stock has enjoyed enormous success over the last few years, realize that it caters to multiple long-term secular growth markets. Whether that’s in artificial intelligence (AI) and machine learning, data centers, cloud computing, supercomputing, graphics, autonomous driving and more.
There’s a reason why the company continues to churn out strong growth and that’s because Nvidia caters to these markets.
Stocks to Buy on the Dip: Advanced Micro Devices (AMD)
Like Nvidia, AMD stock enjoyed a monstrous rally to new all-time highs in November. Also like Nvidia, the company is enjoying strong growth thanks to its customers operating in secular growth markets.
Lastly, and also similar to Nvidia, that didn’t stop the stock from declining 36.6% amid the recent correction.
So, now investors have to decide: Is this the time to get long on AMD stock? I think the recent correction down toward $100 was a great opportunity to initiate a new position or add to an existing one.
Revenue estimates call for 2021 growth of 65%. But with 2021 already finished, we have to look forward to 2022 and beyond. Consensus estimates call for solid yet decelerating growth of roughly 30% this year.
That said, coming into 2021, consensus estimates only called for 20% to 25% growth. We saw the same thing happen in 2020 where estimates were far too conservative, (although there was more understanding because that was such a wild year).
I don’t know if estimates for 2022 will prove conservative as well, but I wouldn’t be surprised in the least.
Stocks to Buy on the Dip: Exxon Mobil (XOM)
As the market shakes off the Omicron variant and the other impacts of the novel coronavirus, Exxon Mobil is a stock that investors should have on their list.
While it hasn’t endured much pain in the market’s dip — in fact, it has bucked the trend tremendously — it’s one that investors may look at as a go-to name this year. It makes up more than 20% of the Energy Select Sector SPDR ETF (NYSEARCA:XLE), and should continue to benefit from a rebound in energy demand.
That is the biggest catalyst for Exxon right now: A return in economic activity should spur energy demand, which should create strength in Exxon’s business. Thus far, it has. 2021 was a big rebound year for the company, where revenue grew nearly 60% and earnings exploded.
However, Exxon Mobil stock now trades at just 12.5 times 2021 expected earnings, while profits are forecast to grow 20% this year. With a 4.4% dividend yield to boot, this may be a stock to buy on the dip.
Stocks to Buy on the Dip: Nike (NKE)
Nike is an incredible brand that has continued to see its stock rise despite the pandemic. That’s as demand for its products remains strong and as athletes continue to play sports despite the pandemic.
However, we’ve seen the stock fall more than 15% in recent weeks, despite better-than-expected earnings in late December. For the bulls, that’s likely going to act as a buying opportunity.
Aside from a strong brand, Nike has multiple business segments to lean on. Specifically, it sells both wholesale and via its own retail stores, but it also has a powerful and growing direct-to-consumer (DTC) business. This allows the company to not only grow sales but also margins — and thus, profit.
Beyond that, Nike is forecast to generate decent growth in its current fiscal year, with revenue and earnings forecasts of 6% and 4%, respectively. However, next fiscal year (which is just two quarters away) is where the real growth is.
Analysts expect an acceleration of 14% revenue growth and 32% earnings growth.
Lululemon Athletica (LULU)
Along similar lines to Nike, we want to take a closer look at Lululemon Athletica. While Lululemon has created a powerful brand for itself — much like Nike — there are some key differences on where they are right now.
For one, Lululemon stock has suffered nearly twice the decline that Nike has, sporting a peak-to-trough loss of 36%. While Lululemon shares rallied after the company reported earnings in December, an early January update put the brakes on.
The company said its results will come in at the lower end of its prior range as the Omicron variant has had a negative impact on business.
I consider that a short-term issue and because Lululemon has built up such a strong brand and DTC business model, it’s one that I want to circle back to when the stock is trading through a significant dip.
Speaking of a “significant dip,” investors in Roku only wish the stock fell 36%. Instead, this one has been badly beaten up, falling nearly 70% from its highs. I don’t want to say that Roku didn’t deserve it. However, I can make the case that this stock was unfairly punished simply for being a growth stock.
While the stock has been decimated, the business has not.
By the way Roku stock has traded, you would think that we’ve seen peak streaming and now a large decline in viewership. That hasn’t been the case, though.
One might wrongly assume that we saw “peak streaming” in the second and third quarters of 2020. That’s April through September of that year, amid heavy restrictions and lockdowns. That’s not true, though. Last quarter, Roku generated 18 billion hours of streaming, up 21% year-over-year (YOY). Active accounts climbed too, up 23% year over year to 56.4 million customers.
Furthermore, average revenue per user (ARPU) grew 49% YOY in the most recent quarter, while platform revenue — the real money maker — climbed more than 80%. Gross profit jumped almost 70%.
Moreover, Roku is free cash flow positive, and revenue is forecast to grow heavily for at least the next three years. Earnings are also expected to boom higher, with estimates currently calling for more than $5.40 per share in profit in 2024.
While that’s a while away, it leaves the stock trading at roughly 27.6 times 2024 earnings. Not bad for a high-growth stock.
The Trade Desk (TTD)
While the rest of the growth stocks were getting demolished in the fourth quarter of 2021, The Trade Desk was roaring higher. In fact, in mid-November, it hit a new all-time high.
That’s so impressive given its valuation and given the state of its peers. However, even The Trade Desk couldn’t outrun the onslaught we’re seeing in growth stocks. While up nicely from the recently, shares were recently down almost 50% from their November high.
That shows just how brutal this selling has been. However, when growth stocks come back, we already know this one is going to be a beast.
The company has impressive growth and has been profitable for years now. The advertising business remains robust (just ask the larger tech players), while analysts expect 42% revenue growth in 2021, 31% growth in 2022 and 26% growth in 2023. I suspect the out-years maybe be a bit conservative.
All the while, earnings are expected to climb as well. I don’t know when or where The Trade Desk will bottom, but I’m confident this stock will be a long-term winner. And down 50% from the highs seems like as good a time as any to take a closer look.
On the date of publication, Bret Kenwell held a long position in NVDA, ROKU and TTD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.