Outside of recent rumblings, the sentiment surge in the equities space this year has taken some of the shine off value stocks to buy on the dip. It’s not that the concept lost relevance or popularity. Rather, they’re just difficult to find amid the market euphoria.
Still, with the shakeup occurring in the technology sector, the red ink might represent an opportunity to reexamine the aforementioned approach. There are several compelling enterprises that just didn’t get the spotlight. That might be changing soon. Below are three risky but attractive value stocks to buy on the dip.
General Motors (GM)
While it’s a risky idea, legacy automotive giant General Motors (NYSE:GM) presents an enticing case for value stocks to buy on the dip. Let’s get the main stats out of the way. Currently, GM trades at only 4.83X forward earnings. That’s well below the sector median of 11.79X. In addition, shares are also priced at 0.34X trailing-year revenue, below the sector median 0.84X.
What’s weird is that GM is a strong performer in the charts. Since the start of the year, shares gained almost 27% of equity value. However, given the cheap multiples, it’s possible that GM could swing up. Personally, I’m almost certain of it because of the fundamental context.
Throughout the past several months, electric vehicles have struggled. They suffer from the double whammy of being higher priced compared to combustion cars and must also contend with the inflation and high-interest-rate headwinds.
On the other hand, combustion-based hybrid vehicles have soared in sales. GM is making the pivot, bringing back its plug-in hybrids. The move should pay off, making it one of the value stocks to buy on the dip.
Sibanye Stillwater (SBSW)
To be upfront, precious metals mining firm Sibanye Stillwater (NYSE:SBSW) is risky. Even if you add the context of value stocks to buy on the dip, it still presents significant challenges. Since the start of the year, the South Africa-based miner lost almost 9% of equity value. But that’s not the worst of it. No, in the past 52 weeks, SBSW stock suffered a decline of more than 44%.
That’s frustrating because – outside of recent choppiness – the gold market has been swinging higher. Concerns about sticky inflation along with geopolitical flashpoints have accelerated the fear trade. Therefore, safe-haven assets like gold have become much more prominent. That’s the baseline argument for SBSW stock. Given that shares are already so undervalued – trading at only 4.49X trailing-year earnings, for instance – SBSW could have a big upside pathway.
In addition, Sibanye is a major producer of palladium. Now, palladium is a critical industrial metal used often in catalytic converters. With hybrid vehicle sales rising, more palladium may be required. Therefore, SBSW should be on your radar for value stocks to buy on the dip.
CVS Health (CVS)
A specialist in the broader healthcare plans segment, CVS Health (NYSE:CVS) is best known for its retail pharmacy business. It also offers a healthcare benefits segment, providing traditional, voluntary and consumer-directed health insurance products and related services. Currently, CVS stock appears grossly undervalued, trading at only 8.12X forward earnings. However, the criticism is that CVS might justifiably be trading at a cheap multiple.
For one thing, analysts on average are expecting fiscal 2024 earnings per share to reach $8.30. That’s disappointing compared to last year’s print of $8.74. Not only that, the most optimistic target calls for EPS of only $8.40. On the revenue front, experts are only projecting 3.6% growth to $370.82 billion. Still, CVS could be a legitimate contender for value stocks to buy on the dip.
It’s not just about the near-17% loss on a year-to-date basis. Rather, CVS should be able to weather the competitive storm. Yes, other enterprises are encroaching into its lane. However, CVS enjoys a powerful brand presence. Plus, with a massive physical footprint, it’s just more convenient.
On the date of publication, Josh Enomoto 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.
