Things are getting extremely volatile in the market. After big tech earnings disappointed, the Nasdaq index plunged more than 600 points (3.5%) in a single trading session as the rotation out of technology securities gathers steam. At the same time, the benchmark S&P 500 index fell more than 2% and posted its worst one-day performance since the 2022 bear market.
While the current situation is worrisome, it could also create opportunities for investors to buy some great stocks on the cheap. Many value stocks that were out of favor with investors this year look even more attractively priced and valued amid the market selloff. Astute investors with long-time horizons can swoop in and buy great stocks while the share price is beaten down and eventually ride them higher once the market recovers.
Here are three value stocks to buy on the dip: July 2024.
PepsiCo (PEP)
Soft drink maker PepsiCo’s (NASDAQ:PEP) stock is down 12% over the last year compared to a near 20% gain for the benchmark S&P 500 index. The company behind Pepsi and Mountain Dew has struggled with inflation, forcing it to raise prices and drive price-conscious consumers towards generic alternatives of its products, which also include Gatorade and Lay’s potato chips.
PepsiCo recently reported mixed second-quarter financial results, with its profit beating Wall Street forecasts but its revenue coming up short. The sales miss was reportedly because of the declining demand in North America. PepsiCo’s prices rose an average of 5% during this year’s second quarter. The company also continues to deal with fallout from product recalls at its Quaker Foods division, which makes oatmeal.
Despite these near-term headwinds, PEP stock looks positioned for long-term success, especially with interest rates expected to decline this autumn and the Quaker Foods recall sliding into the rearview mirror.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH), the biggest health insurer in the U.S., has seen its stock short-circuited by a cyberattack on its technology unit called “Change Healthcare” that occurred in February of this year. The attack on Change Healthcare disrupted UnitedHealth’s payment system and forced it to provide $9 billion of loans to partners. It’s also expected to cost the company $1.90 to $2.05 in earnings per share this year.
Owing largely to the cyberattack, UNH stock is up 6% this year. While disappointing, there are signs that UnitedHealth Group is turning a corner. The company just reported Q2 financial results that beat Wall Street forecasts. UnitedHealth reported EPS of $6.80, topping analyst estimates of $6.67. Revenue during the quarter totaled $98.86 billion, which was slightly ahead of forecasts that called for $98.72 billion.
Management said the worst is likely over for the company concerning the cyberattack earlier this year. That makes UnitedHealth Group a value stock worth buying on the dip.
Morgan Stanley (MS)
Among banks, Morgan Stanley (NYSE:MS) looks like a good buy-the-dip candidate. The Wall Street investment firm has been the laggard among major financial institutions over the last 12 months. Morgan Stanley’s stock is up only 10% during the past year, while archrival Goldman Sachs (NYSE:GS) stock has gained 36% in the same period of time. Several other banks, such as JPMorgan Chase (NYSE:JPM), were also up more than 30% since this time last year.
Morgan Stanley’s stock also looks fairly valued trading at 15 times future earnings estimates and offering a quarterly dividend payment of 92 cents a share, giving it a yield of 3.63%. Now would be an opportune time to take a position, with Morgan Stanley’s business firing on all cylinders. With its Q2 print, the investment bank reported a big rebound in its deal-making activity, stock trading and in its lucrative wealth management unit. Its investment banking revenues surged 51% year-over-year, crushing estimates.
Morgan Stanley also has a new CEO in Ted Pick, who took the helm of the bank at the start of this year.
On the date of publication, Joel Baglole 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
