I love stock market corrections. Of course, I know a lot of people will say that, then panic when we get a run-of-the-mill 5% to 10% dip in the indices. But the truth of the matter is, these corrections highlight the top stocks to buy.
I have laid out my views and strategy on buying high-growth stocks during corrections before. However, there are other strategies to keep in mind here as well. One of those strategies? Relative strength.
Simply put, when the market is correcting, I like to look for stocks that are outperforming. That’s strength that is relative to the general market, like the S&P 500 or the Nasdaq.
During the latest pullback, we not only found stocks that held up well, but stocks that actually traded higher. So, if the market takes another dip — and drags some of these stocks down a bit in the process — they are likely to be among the first names to snap back higher on the rebound.
All that said, here are seven stocks to buy on any market dips:
- Advanced Micro Devices (NASDAQ:AMD)
- Cloudflare (NYSE:NET)
- Upstart (NASDAQ:UPST)
- Tesla (NASDAQ:TSLA)
- Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG)
- Netflix (NASDAQ:NFLX)
- Affirm (NASDAQ:AFRM)
Stocks to Buy on the Dip: Advanced Micro Devices (AMD)
First up on this list of stocks to buy is AMD. I won’t provide charts for every pick on this list, but I do want to provide one for Advanced Micro Devices.
Not only did AMD stock put together a very impressive breakout last week — one that I discussed in my top stock trades column — it also had a robust rally earlier in the year. Amid that rally, volume was incredibly high.
What does that indicate? To my interpretations, combined with the power in which AMD hit new highs, this suggests institutional buying. Otherwise known as “accumulation,” these types of footprints on the chart suggest some big purchases.
As we saw on the ensuing dip, AMD stock was able to find support. In this case, it came near the key level and breakout area around $100. Now on ensuing dips, I expect buyers to continue supporting the name.
Not to mention that AMD’s powerful growth rates continue to overwhelm analysts, who consistently put out too conservative of expectations. All told, be sure to stick with this long-term winner.
Cloudflare has been enjoying a robust rally. NET stock bottomed on Oct. 1 and has rallied every session since (as of Oct. 20). Now up in 14 straight sessions, the stock has enjoyed a rally of more than 55% during that span.
That’s an incredible move, especially for a company that now has a market capitalization of $57 billion. Of course, I don’t know how long the rally will continue. But given this bout of relative strength, I expect bulls to buy the dip.
Cloudflare has impressive growth estimates to go along with its impressive chart, too. Analysts expect almost 50% revenue growth this year and more than 33% growth in 2022. In 2023, estimates sit at about 30%.
In other words, NET has strong momentum in its business. If it can continue to deliver on that growth, the stock should keep on enjoying strong runs to the upside. Look for this pick of the stocks to buy to fetch a bid on the pullback.
Stocks to Buy on the Dip: Upstart (UPST)
Like Cloudflare, Upstart has enjoyed a pretty powerful run as well. Unlike Cloudflare, though, the stock didn’t wait until October to begin its rally — although both stocks to buy hit new all-time highs this month.
From its low on Aug. 10, UPST stock has rallied almost 200% to its 52-week high. That’s incredibly impressive, particularly as the broader stock market has been largely enduring a slow but steady pullback since the S&P 500 topped out on Sept. 2.
Upstart did suffer an 18% pullback from the September high. However, buyers quickly stepped in and bid the stock back up to new highs. Perhaps another correction occurs from here and hits UPST again. At the least, at some point there will be another decline.
For now, though, the bulls are in control. But if shares come under pressure, look for the dip to be bought.
Tesla is a highly emotional battleground cult stock. This pick of the stocks to buy commands a high valuation and a big market cap, sitting at more than $890 billion currently. Personally, I think the runway is being cleared for a run to $1,000 per share and a $1 trillion market cap.
Will it get there this quarter?
Despite the pullback in the overall market and for many electric vehicle (EV) stocks, Tesla has shown remarkable dependability and relative strength. The stock has traded higher for weeks, enjoying breakout after breakout. Now it has nothing standing between it and its all-time high near $900 — at least, technically speaking.
A correction is more than possible at some point and one could even argue that a pullback would be healthy. However, I expect TSLA stock will find buyers on a dip, given how well it has traded over the past two months through the current market correction.
Not to mention that Tesla continues to deliver better-than-expected as well as record delivery results. If the market goes on to enjoy a year-end rally, look for the dips to be bought aggressively in Tesla.
Stocks to Buy on the Dip: Alphabet (GOOG)
Next up on this list of stocks to buy, Alphabet is the best-performing FAANG component so far this year and over the past 12 months. The stock is up 62% year-to-date (YTD) and 83% for the one-year stretch, respectively. That’s despite GOOG stock pulling back with the rest of the market.
Alphabet is firing on all cylinders right now. The company continues to deliver impressive results, beating on earnings and revenue expectations for five straight quarters. In the most recent quarter, sales of roughly $62 billion beat estimates by almost $6 billion. Earnings per share (EPS) of $27.26 also beat expectations by some $8 per share.
The momentum in this company’s business is impressive, just as the run in the stock price has been. Until this momentum slows, bulls should continue to buy the dips in this FAANG leader.
Changing gears a bit, what about Netflix? While Alphabet trounces it on the YTD and one-year measures — and it trounces all of the FAANG components — NFLX stock is still a better-performing component over the last one- and three-month periods.
The run has been enough to send Netflix to all-time highs (and a key extension point). Now, however, we’re getting a pullback.
Netflix does not have the same dependable business that Alphabet does. That said, it does have strong momentum. Investors don’t want to bet against that momentum until it has clearly vacated the stock.
Earnings were reported on Oct. 19, but don’t appear to be altogether derailing the rally. Let’s see if this pick of the stocks to buy can push higher once again.
Stocks to Buy on the Dip: Affirm (AFRM)
Last up on this list of stocks to buy is AFRM stock. Where did Affirm come from, now commanding a nearly $42 billion market cap? The company went public back in January, quickly garnering a huge valuation. However, the stock underwent a long and painful decline after that, losing almost 70% of its value. It didn’t help that it went public right before growth stocks blew the top off and went on a massive rally. Affirm bottomed with the rest of the growth stocks in early May.
However, when the company announced a new deal with Amazon (NASDAQ:AMZN) in September, it caught some serious momentum again. Plus, a month later, it announced a deal with Target (NYSE:TGT). That has also helped propel this name higher.
Two massive deals with two massive retailers and two massive rallies as a result. Achieving this ahead of the holidays was also a key catalyst to AFRM stock’s recent run. But when it comes down it, Affirm’s business — providing small shopping loans to consumers — is a perfect fit for retailers and the online world we find ourselves in now.
Granted, this pick of the stocks to buy has been a volatile ride. The big rallies make it susceptible to a pullback. However, with a dip, buyers are likely to be nearby.
On the date of publication, Bret Kenwell held a long position in AMD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
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