WARNING: Market Shock Imminent

Join us on September 29 at 4 p.m. ET at the Market Shock 2022 event to find out what’s coming and how to profit.

Thu, September 29 at 4:00PM ET
 
 
 
 

7 Large-Cap Stocks to Buy on the Dip

  • Undervalued large-cap stocks to buy on the dip could offer attractive upside potential for long term investors.
  • Abbott Laboratories (ABT): The Dividend King saw diagnostics revenue jump 32% year-over-year.
  • Avantis International Large Cap Value ETF (AVIV): Provides exposure to companies with high profitability and low valuations.
  • Costco Wholesale (COST): Strong Q3 results call for buying the stock on the dip.
  • Danaher (DHR): Remains a cash cow despite macroeconomic headwind.
  • iShares Morningstar Value ETF (ILCV):  The ETF provides exposure to a value-focused portfolio of large- and mid-cap stocks.
  • Linde (LIN): The industrial gas giant raised full-year 2022 adjusted EPS guidance.
  • Nvidia (NVDA): Despite the decline in share price, the chip giant is growing its dominance in cutting-edge technologies.
Large-Cap Stocks to Buy on the Dip - 7 Large-Cap Stocks to Buy on the Dip

Source: Spyro the Dragon / Shutterstock.com

Following this year’s sell-off, seasoned investors are increasingly hunting for large-cap stocks to buy on the dip. For instance, the S&P 500 index and Dow Jones Industrial Average have lost 185 and 13% so far in 2022. As investors rotate toward safer bets, undervalued large-cap stocks could offer attractive upside potential for long-term investors.

Recent numbers from the Bureau of Labor Statistics reported show the consumer price index increased 9.1% from June 2021. Put another way, the U.S. is facing its highest inflationary pressure in four decades.

Wall Street now expects the Federal Reserve to continue its aggressive position on taming inflation. Many analysts are already bracing for a full percentage point hike in interest rates in late July.

Amidst such macroeconomic headwinds, it could be prudent to get more defensive by investing in large-cap stocks. Such shares boast mature businesses with wide moats. Investors can typically rely on them for stable revenue, earnings growth and dividends.

With that information, here are seven large-cap stocks to buy on the dip that could offer lucrative returns for long-term investors.

Ticker Company/Fund Recent Price
ABT Abbott Laboratories $108.88
AVIV Avantis International Large Cap Value ETF $42.25
COST Costco Wholesale $510.85
DHR Danaher $274.04
ILCV iShares Morningstar Value ETF $62.12
LIN Linde $285.65
NVDA Nvidia $166.11

Abbott Laboratories (ABT)

Healthcare giant Abbott Laboratories (NYSE:ABT), our first large-cap stock  It manufactures medical devices, nutritional products, diagnostic equipment, testing kits, as well as branded generic drugs.

Abbott reported Q2 results on July 20. Revenue stood at $11.3 billion, up 10.1%. Adjusted diluted earnings per share came in at $1.43.

Meanwhile, Abbott’s nutrition segment was in the spotlight due to the nationwide baby formula shortage caused by the closure of one of its factories. Despite the bad press the company received, this shortage also highlighted Abbott’s solid competitive advantage in this niche segment.

In early June, management announced Abbott’s FreeStyle Libre 3 system. It will become the first 14-day continuous glucose monitoring system to eliminate daily fingersticks. Long-term ABT investors will look at how it can contribute to Abbott’s bottom line.

ABT stock has been hovering near its 52-week low. This Dividend King recently supported a yield of 1.8%. Shares were changing hands at 22.6 times forward earnings and 4.4 times sales. Wall Street’s 12-month median price forecast for Abbott stock stands at $132.50.

Avantis International Large Cap Value ETF (AVIV)

The Avantis International Large Cap Value ETF (NYSEARCA:AVIV) invests in global companies with high profitability that also trade at low valuations. The fund started trading in September 2021.

AVIV tracks the MSCI World Ex-USA Value Index and has 474 holdings. Regarding sector weightings, we see Finance with 25.88%, Energy Minerals with 15.30%, and Non-Energy Minerals with 10.36%.

The top 10 stocks in the fund account for more than 17% of $41.6 million in net assets. Energy and petrochemical giants Shell (NYSE:SHEL) and BP (NYSE:BP); mining companies Anglo American (OTCMKTS:ANGPY) and Rio Tinto (NYSE:RIO) are among the leading holdings in the fund.

The ETF WAS down 19% this year. Price-to-earnings and price-to-book ratios stand at 9.35x and 1.29x, respectively. AVIV could appeal to readers looking for international large-cap with juicy dividends.

Costco Wholesale (COST)

Wholesale giant Costco Wholesale (NASDAQ:COST) boasts around 850 membership warehouses around the globe. Its share of retail e-commerce stateside is over 1.5%.

The wholesale giant released Q3 financials on May 26. Revenue increased 16.3% YOY to $51.61 billion from $44.38 billion last year. Diluted EPS increased to $3.04, up from $2.75 in the prior-year quarter. Cash and equivalents ended the period at $11.2 billion.

Costco grew its membership households 6% YOY to 64.4 million. Global membership renewal rates stand at a robust 90%. Comparable-store sales accounted for nearly 15% of the revenue growth.

Meanwhile, Costco recently acquired the minority interest of 45% of Costco Taiwan. Investors are wondering if Costco’s international expansion steps are likely to continue in future quarters.

Shares have lost 13% of their value YTD, yet they are up 21% over a 52-week period. Forward P/E and P/S metrics stand at 34.8 and 1x, respectively. Wall Street’s 12-month median price forecast for Costco stock is $546.50.

Danaher (DHR)

Our next stock pick for today is the industrial play Danaher (NYSE:DHR), which manufactures life sciences, diagnostics and environmental products. Among other industrial manufacturers stateside, its market share is well over 2%.

On July 21, DHR released its second-quarter financials. Revenue increased 7.5% YOY to $7.8 billion. Adjusted diluted EPS came in at $2.25, down. 1.5% compared to a year ago. The mighty cash cow generated a free cash flow of $1.7 billion in the quarter.

In 2021, Danaher had enjoyed significant diagnostic revenue thanks to Covid-19 testing. Wall Street was pleased that management generated double-digit growth in Q2 2022.

DHR stock is down about 14% YTD.

Yet, many analysts point out DHR shares deserve a premium due to its wide moat, continuous growth prospects, and strong profit margins. Analysts’ median price forecast for Danaher stock stands at $320.

iShares Morningstar Value ETF (ILCV)

The iShares Morningstar Value ETF (NYSEARCA:ILCV) provides exposure to U.S. companies that are considered to be undervalued compared to their peers. The fund started trading in June 2004.

ILCV tracks the Morningstar US Large-Mid Cap Broad Value Index and has 536 holdings. Regarding sectoral distribution, we see Health Care with 18.11%, Financials with 16.83%, Information Technology with 12.60%, and Industrials with 10.46%, among others.

The top 10 stocks in the portfolio represent more than a fifth of the $720 million in total net assets. Leading names on the roster include Apple (NASDAQ:AAPL), Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), Johnson & Johnson (NYSE:JNJ), and Exxon Mobil (NYSE:XOM).

The ETF is currently down 13.5% YTD. P/E and P/B ratios stand at 14.3x and 2.5x, respectively. We believe ILCV could find a place in long-term portfolios, especially following the recent declines on Wall Street.

Linde (LIN)

Linde (NYSE:LIN), our next large-cap stock, is one of the largest industrial gas suppliers worldwide. The gas giant serves various end markets, including chemicals, manufacturing, healthcare, and steelmaking. Globally, the group has a market share of about 30%.

On April 28, Linde announced Q1 earnings. Revenue jumped 13% YOY to $8.2 billion. Adjusted earnings came in at $2.93 per diluted share, up 18% YOY. Free cash flow generated during the quarter stood at $1.35 billion.

Management raised full-year 2022 adjusted EPS guidance to $11.65 to $11.90. These numbers would represent a 9% to 11% growth YOY.

In late June, the Austrian food retailer MPREIS launched Europe’s most powerful hydrogen refueling station. It was designed and built by Linde Engineering to supply green hydrogen for trucks. As global decarbonization efforts increase, analysts expect Linde to play a growing role in this space.

So far in 2022, LIN stock is down nearly 21%. The current price level supports a dividend yield of 1.7%. Shares are trading at 22.9 times forward earnings and 4.5 times sales. Wall Street’s 12-month median price forecast stands at $358.97.

Nvidia (NVDA)

Next up is the semiconductor giant Nvidia (NASDAQ:NVDA). We find its chips increasingly in autonomous driving, robotics and virtual reality.

Within the graphics processing unit, or GPU, segment, Nvidia’s market share is around 20%. Meanwhile, InvestorPlace.com readers will know company is in the process of transitioning from a dominant hardware player to a computing platform company. 

The chipmaker reported Q1 FY23 results on May 25. Revenue came in at a record $8.29 billion, up 46% year-over-year. Adjusted earnings came in at $1.36 per diluted share, up 49% YOY. Cash and equivalents ended the period at $3.89 billion.

The company recently launched Nvidia Omniverse, a platform for Web 3.0 developers to build their own metaverse products. In late June, Nvidia and Siemens (OTCMKTS:SIEGY) jointly announced they will increase the use of AI to bring industrial automation to a new level. The two companies will connect Siemens’ open digital business platform with Nvidia’s Omniverse 3D design and collaboration platform.

NVDA stock is down more than 48% YTD, near its 52-week lows. Shares are trading at 29.4 times forward earnings and 13.6 times sales. Finally, the current 12-month median price forecast for Nvidia stock stands at $229.

On the date of publication, Tezcan Gecgil, Ph.D., is both long and short NVDA. 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.


Article printed from InvestorPlace Media, https://investorplace.com/large-cap-stocks-to-buy-on-the-dip/.

©2022 InvestorPlace Media, LLC