S&P 500 stocks to buy on the dip is our topic today. Unrelenting inflation and the potential response from the Federal Reserve have been of particular concern to investors. The June Consumer Price Index (or CPI) did little to assuage fears, rising 9.1% from a year ago.
The skyrocketing inflation and the subsequent interest rate rises have led to a decline of over 17% for the benchmark S&P 500 index year-to-date. But the recent market decline provides the perfect opportunity to “buy the dip.”
According to Capital Group, investors should take advantage of such large declines with a long-term investment horizon, as the rebounds are worth the wait. Their research suggests, “The S&P 500 Index has typically dipped at least 10% about once a year, and 20% or more about every six years, according to data from 1950 to 2019 … every S&P 500 decline of 15% or more, from 1929 through 2019, has been followed by a recovery. The average return in the first year after each of these declines was 54%.”
With that information, here are my picks for S&P 500 stocks to buy on the dip.
| AMZN | Amazon | $120.97 |
| AMT | American Tower | $258.28 |
| BA | Boeing | $156.09 |
| MA | Mastercard | $343.27 |
| TXN | Texas Instruments | $171.54 |
| TMO | Thermo Fisher Scientific | $581.93 |
| DIS | Walt Disney | $103.50 |
Amazon (AMZN)
52-week range: $101.26 – $188.11
Leading e-commerce giant Amazon (NASDAQ:AMZN) is one of the Big Four technology companies. Its brand is among the top three most valuable in the world. In addition to the online marketplace, the company also operates Amazon Prime Video and Amazon Web Services (AWS).
In late April, Amazon reported first-quarter financials. Net sales totaled $116.4 billion, an increase of 9% year-over-year (YOY) in constant currency. Net loss per diluted share came in at $7.56, compared to a net profit of $15.79 in the prior-year quarter. Free cash flow (or FCF) was negative $18.6 billion.
Cash and equivalents came in at $36.5 billion.
AWS recently announced the availability of new serverless options for Amazon EMR, Amazon MSK and Amazon Redshift, which will help customers analyze vast amounts of data without the need to configure, scale or manage the underlying infrastructure. Wall Street is keen to see how they can help Amazon’s bottom line.
AMZN stock has dropped 28% YTD. Forward price-to-earnings (P/E) and price-to-sales (P/S) numbers are 73x and 2.6x, respectively. Meanwhile, analysts’ 12-month median price forecast stands at $170.
American Tower (AMT)
52-week range: $220 – $303.72
American Tower (NYSE:AMT) operates as a real estate investment trust (or REIT) and is one of the largest owners and developers of wireless and broadband communications real estate. The company’s global portfolio contains some 221,000 communications sites.
In late April, American Tower provided Q1 earnings. Total revenue increased 23.2% YOY to $2.66 billion. Net income came in at $1.56 per diluted share compared to $1.45 the prior year. Free cash flow was $269 million.
Recently, the company announced that Stonepeak will acquire around 29% of American Tower’s data center business. This transaction, valued at $2.5 billion, will position both names to “mutually benefit from the demand for low-latency, hybrid IT solutions and agile interconnection across the platform’s data center campuses.”
So far in 2022, AMT stock has declined around 12%. Shares are trading at 59.5 times forward earnings and 12 times sales. The dividend yield is 2.2%. Wall Street’s 12-month median price forecast is at $284.50.
Boeing (BA)
52-week range: $113.02 – $241.15
Boeing (NYSE:BA) is one of the world’s largest aerospace and defense companies manufacturing the 7X7 series commercial airplanes. More than 10,000 Boeing aircraft are currently in service — that’s nearly half of all commercial planes used today. Furthermore, the Boeing Defense, Space & Security business unit provides military aircraft, satellites and autonomous systems.
In late April, Boeing released Q1 earnings. Revenue was $14 billion, an 8% decrease YOY. Core loss per share widened to $2.75, compared to a loss of $1.53 the year before. FCF was an outflow of $3.6 billion.
Boeing showcases the newest and largest members of its 777X and 737 MAX airplanes, the 777-9 and 737-10, at the Farnborough International Airshow this month. These airplanes, each one the most fuel-efficient in its class, will fly to the show on a blend of sustainable aviation fuel. Wall Street will want to see how these planes may contribute to the top line growth.
BA stock has fallen around 23% YTD. Forward P/E and P/S numbers are 185x and 1.5x, respectively. Meanwhile, analysts’ 12-month median price forecast stands at $200.
Mastercard (MA)
52-week range: $303.65 – $399.92
Payments technology giant Mastercard (NYSE:MA) connects billions of consumers, issuers and enterprises. Its principal business is to process payments between the banks of merchants and the card-issuing banks that use the “Mastercard” brand debit, credit and prepaid cards to make purchases. In the U.S., its market share is well over 20%.
In late April, Mastercard reported Q1 financial results. Adjusted net revenue was $5.1 billion, an increase of 27% YOY in constant currency. Adjusted diluted earnings per share soared 59% to $2.76, compared to $1.74 the previous year. Cash and equivalents totaled $6.9 billion.
The payments giant recently expanded its Mastercard Travel & Lifestyle Services platform to address the post-pandemic return to travel. The program now provides travel and concierge service through WhatsApp — owned by Meta Platforms (NASDAQ:META) — in several countries. The growth in international travel should provide tailwinds for Mastercard.
So far in 2022, MA stock has lost more than 4%. Shares are trading at 33.6 times forward earnings and 17.1 times sales. Wall Street’s 12-month median price forecast is at $420.
Texas Instruments (TXN)
52-week range: $144.46 – $202.26
Chip giant Texas Instruments (NASDAQ:TXN), also known as TI, holds more than 45,000 patents and manufactures some 80,000 products for more than 100,000 customers. Its global market share is shy of 3%.
In late April, TI presented Q1 financials. Revenue increased 14% YOY to $4.91 billion. Diluted EPS was $2.35, compared to $1.87 a year ago. FCF was $1.7 billion, while cash and equivalents came in at $3.5 billion.
Recently, the company broke ground on four new semiconductor wafer fabrication plants (fabs) in Sherman, Texas. These new fabs will manufacture tens of millions of analog and embedded processing chips daily, with production slated to begin in 2025. This investment should help better position Texas Instruments to address the global semiconductor shortage.
TXN stock has fallen 9% YTD. The dividend yield is 2.9%. Forward P/E and P/S numbers are 18.6x and 8.1x, respectively. Meanwhile, analysts’ 12-month median price forecast stands at $175.
Thermo Fisher Scientific (TMO)
52-week range: $497.83 – $672.34
Thermo Fisher Scientific (NYSE:TMO) is well known for its scientific instruments. It also provides compounds and reagents, and software for various scientific disciplines, primarily the life sciences. The company’s market share exceeds 4.5%.
In late April, Thermo Fisher provided Q1 earnings. Revenue grew 19% to $11.82 billion. Adjusted diluted EPS was $7.25, compared to $7.21 the year before. FCF was $1.56 billion. Cash and equivalents ended the quarter at $2.78 billion.
The life-sciences company recently showcased a number of new technologies in mass spectrometry for vaccine and therapy development. Wall Street expects many of them to contribute to Thermo Fisher’s bottom line.
TMO stock has dropped more than 12% YTD yet still has gained 10% over the past year. Shares are trading at 24.7 times forward earnings and 5.4 times sales. Wall Street’s 12-month median price forecast is at $660.
Walt Disney (DIS)
52-week range: $90.23 – $187.58
Walt Disney (NYSE:DIS) is one of the largest entertainment companies in the world. Its best-known brands include ESPN, Pixar, Marvel Studios, Lucasfilm and, of course, Disney. Before the pandemic, some 150 million people visited Disney theme parks worldwide annually.
In early May, Disney posted Q2 metrics. Revenue increased 23% YOY to $19.2 billion. Diluted EPS came in at $1.08, compared to 79 cents the previous year. FCF was $686 million.
At the end of June, the company’s board voted unanimously to extend CEO Bob Chapek’s contract for three years. Wall Street expects Chapek to play a continued role in the growth of the entertainment giant.
DIS stock has tumbled almost 33% YTD. Forward P/E and P/S numbers are 19.2x and 2.5x, respectively. Meanwhile, analysts’ 12-month median price forecast stands at $130.
On the date of publication, Tezcan Gecgil, Ph.D., is both long and short AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
