7 Stocks to Buy on Weakness While You Can
Despite the “hotter-than-expected” U.S. inflation data reported on Feb. 24, the fundamentals of the U.S. economy remain pretty strong. But don’t take my word for it; listen to the CEO of JPMorgan, Jamie Dimon, who told C…
Despite the “hotter-than-expected” U.S. inflation data reported on Feb. 24, the fundamentals of the U.S. economy remain pretty strong. But don’t take my word for it; listen to the CEO of JPMorgan, Jamie Dimon, who told CNBC on Feb. 23 that “The U.S. economy is doing quite well. Consumers have a lot of money, and they’re spending it.” Indeed, The Wall Street Journal reported on Feb. 24, “Spending by U.S. households rose a seasonally adjusted 1.8% in January from the prior month, the largest increase in nearly two years.” In that environment, it’s not surprising that many companies, including General Motors (NYSE:GM), Beyond Meat (NASDAQ:BYND), and Booking Holdings (NASDAQ:BKNG), have recently reported solid results, propelling their stocks significantly higher. And given that most companies’ businesses, directly or indirectly, are based on consumer spending, many other firms are likely to report very strong financial results om the current environment, greatly boosting their stocks. Given those points, investors should look for stocks to buy on weakness.
These seven names, which all have strong fundamentals and benefit from powerful, ongoing trends that should last indefinitely, are great stocks to buy on the dip.
Source: Michael Vi / Shutterstock.com
PayPal (NASDAQ:PYPL) reported very strong fourth-quarter results, showing that my bullish thesis on the company remains intact.
Specifically, as I’ve stated in the past, I think that the company has a firm position in the digital payments market and that it is likely to continue to maintain that position over time. And, of course, the digital payments sector continues to grow rapidly.
Meanwhile, activist investor Elliott Management, which has acquired a $2 billion stake in PayPal, should have a significant, positive impact on PayPal and PYPL stock. In my experience, activist investors do tend to find ways to boost their targets’ stocks. Moreover, CNBC reports that “Elliott is a very successful and astute activist investor, particularly in the technology sector.
Regarding the Q4 results, PayPal’s revenue jumped 10% year-over-year, excluding currency fluctuations, while its free cash flow climbed 4% YOY to $5.1 billion.
Also noteworthy is that PayPal’s CEO, Dan Schulman, who’s due to leave the position at the end of this year, recently bought over 26,065 shares of PYPL stock.
The shares have tumbled 10.5% over the month that ended on Feb. 23.
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Benefiting from the travel boom, TripAdvisor (NASDAQ:TRIP) reported very strong fourth-quarter results. The company’s revenue jumped 47% versus the same period a year earlier, and its EBITDA, excluding certain items, soared 50% YOY to $43 million. The company’s Q4 revenue was 6% higher than in Q4 of 2019. Moreover, despite high inflation, TRIP’s margins rose in 2022 versus 2021.
The company should benefit as the trend of more consumers booking their vacations online instead of offline continues, and TRIP plans to increase its monetization of experiences, the company’s CEO, Jane Jie Sun, said on its fourth-quarter earnings conference call.
TRIP’s cash rose nearly $300 million year-over-year to $1.02 billion.
After sinking 8% in the last month, TRIP has an attractive price-earnings ratio of 16.7. Last quarter, institutions bought or held nearly 90 million shares of TRIP stock and only sold 13.3 million shares of the name, according to Nasdaq.com.
Caterpillar (NYSE:CAT), a huge construction-equipment and mining-equipment maker, is well-positioned to benefit from multiple, powerful trends, and it reported outstanding fourth-quarter results in January. Moreover, the valuation of CAT stock is very attractive.
Among the trends likely to boost CAT going forward are Washington’s infrastructure law, the onshoring trend in general, and the construction of many semiconductor, electric-vehicle, battery, and renewable-energy plants.
On the earnings front, CAT’s revenue jumped 20% year-over-year last quarter, while its Q4 earnings per share, excluding certain items, soared 43% YOY. For all of 2022, its sales jumped 17% YOY, while its bottom line increased 7% to a record of $13.84. And, most impressively and most importantly, its backlog soared 32% last year to a huge $30.4 billion.
“While we continue to closely monitor global macroeconomic conditions, overall demand remains healthy across our segments, and we expect 2023 [to] be better than 2022 on both top and bottom line,” CAT CEO James Umpleby III stated on the company’s Q4 earnings call.
CAT stock has a low forward price-earnings ratio of just 15, while the shares slipped 7% between Jan. 27 and Feb. 24. Given all of CAT’s positive attributes and its recent pullback, it is a great stock to buy on weakness.
Source: T. Schneider / Shutterstock.com
Showing a significant amount of faith in beleaguered automaker Arrival (NASDAQ:ARVL), Antara Capital Master Fund LP agreed to buy up to $50 million of ARVL stock.
The deal dramatically lowers the chances of ARVL going bankrupt and tremendously raises the chances of the automaker becoming successful. That’s because the agreement cuts ARVL’s debt by nearly $122 million, or 38%. Moreover, even Seeking Alpha contributor Mobility Matters Research, who’s extremely bearish on Arrival, calculates that the automaker’s current cash will hold up until the firm is slated to begin production in 2024.
Predictably, much if not most of the Street, which tends to focus on quantitative measures and ignore much more important quantitative ones, is, like Mobility Matters, quite pessimistic about ARVL.
But most of the same types were also sure that JinkoSolar (NYSE:JKS), BlackBerry (NYSE:BB), Plug Power (NASDAQ:PLUG), and Tesla (NASDAQ:TSLA) would all go bankrupt at one point or another over the last ten years. And all four of those firms are very much surviving and thriving today. At the same time, they all rewarded their shareholders quite handsomely before the Street soured on growth stocks starting in 2021 because of higher inflation and the Fed’s interest rate hikes. (In line with my previous predictions, the Street is finally starting to see the folly of that view this year).
In Arrival’s case, its crucial, quantitative, positive catalysts include its partnerships with UPS (NYSE:UPS) and Uber (NYSE:UBER) and the huge demand for electric delivery vehicles.
After tumbling 91% over the last year and 28% in the last month, ARVL stock has a market capitalization of just $187 million, vastly understating its outlook.
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The Street has turned bearish on solar because of its worries about California’s decision to reduce the amount of money it pays its residents for the energy its solar panels send to the grid. Partly because of that fear, the shares of SolarEdge (NASDAQ:SEDG), which makes solar inverters, tumbled 44% from Feb. 15 to Feb. 24.
However, the outlook for solar energy in both the U.S. and Europe, SolarEdge’s two largest markets, is robust. Both markets’ solar energy utilization is expected to jump tremendously this year.
In the U.S., America’s Energy Information Administration recently forecasted that “54.5 GW of total capacity is expected to come online this year,” up from just 10.3 gigawatts last year.
And in Europe, there will be over 50 gigawatts of solar capacity linked to the grid in the EU after the bloc’s solar activations jumped 47% in 2022 to 41 gigawatts.
“We are confident that further annual market growth will beat all expectations, exceed 50 GW deployment level in 2023, and more than double from today to 85 GW in 2026,” SolarPower asserted.
For the fourth quarter, SolarEdge’s revenue soared 61% year-over-year to a record $891 million and came in $11.6 million above analysts’ average estimate. Its operating profit, excluding certain items, was an impressive $150 million, representing an all-time high. For all of 2022, it generated a net income, excluding certain items, of $351 million.
Given the company’s strong growth and solar’s positive future, its current market cap of $16.63 billion is way below its long-term outlook.
Source: Dennis Diatel / Shutterstock.com
Strong evidence indicates that Bionano’s (NASDAQ:BNGO) optical genome technology is tremendously useful, and its usefulness will continue to increase. In a document previously found by a YouTube broadcaster, Mr. INVEST ALOT, a Department of Paediatric Endocrinology professor at Sheffield Children’s NHS Foundation Trust, Paul Dimitri, explains that OGM is extremely useful and will become very widely utilized in the future.
Specifically, Dimitri wrote that “Optical genome mapping (OGM)…is now recognised as key genomic technology capable of detecting of all classes of structural variants in many disorders, which will undoubtedly improve the speed and accuracy of diagnosis of rare disorders in children.”
He added that studies have shown that OGM is superior to standard testing for detecting acute lymphoblastic leukemia in children. Additionally, the professor predicted that “Given the extended capabilities of OGM, many undiagnosed conditions in [pediatric patients] will be explored using OGM.”
And in more very bullish news, a recent press release from Bionano indicates that the Chinese government has become a backer of OGM and, by extension, Bionano. That’s because, on Feb. 22, Bionano announced that its Chinese partner had obtained approval from Beijing to utilize “Bionano’s DNA extraction kit and labeling products.” Of course, China is a potentially huge market for Bionano.
With BNGO down 40% over the last year and its market cap sunk to $377 million, the stock is poised to surge over the long term, given the company’s extraordinarily bright future.
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Volkswagen (OTCMKTS:VWAGY) reported a net cash flow of roughly 5 billion euros last year. That was impressive but significantly below the automaker’s target of 8.6 billion euros. However, the company explained that supply-chain issues were primarily responsible for the miss. So with global supply chains generally improving meaningfully, Volkswagen’s profits should jump meaningfully this year. Also worth noting is that the automaker’s operating profit came in at a much higher 22.5 billion euros.
Meanwhile, boding very well for Volkswagen’s longer-term outlook, in the third quarter of last year, its “total deliveries” climbed 10% year-over-year. In contrast, its deliveries of electric vehicles soared 25% YOY. And in Europe, where electric vehicles accounted for 24% of total vehicle sales last year, Volkswagen EV brands ranked third and fourth on the top-selling list in December, trailing only Tesla’s Model 3 and Model Y.
The company’s sales slipped 7% for the full year, but it was still the second-leading automaker by unit sales, behind only Toyota (NYSE:TM). What’s more, its EV sales climbed 26% in 2022.
With China and the EU rapidly switching to EVs and the U.S. beginning to follow suit, Volkswagen’s future looks bright.
Volkswagen has tumbled 34% in the last year, and it’s changing hands at a very cheap trailing price-earnings ratio of 5.1 while it pays a handsome dividend yield of 4.55%.
As of the date of publication, Larry Ramer owned shares of ARVL,JKS,PLUG, BB, and BNGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.
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