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In this article, we will be taking a look at the 10 stocks to buy on sale and never look back. You can skip our detailed analysis of these stocks and current market trends and go directly to see the 5 Stocks to Buy on Sale and Never Look Back.
In the third quarter of 2022, inflation pressures resulted in central banks, including the Federal Reserve, to tighten monetary policy. Nominal and real bond yields have been pushed to their highest levels in over a decade as a result, with the market being thrown into a downturn. According to a Fidelity Investments report published this year, profit growth has been decelerating while remaining positive, while expectations for earnings growth among S&P 500 stocks stood at 10%.
As a result of the inflationary pressures and rising interest rates, the country is thrown into a state of confusion. We aren't in a recession, yet major companies such as NVIDIA Corporation (NASDAQ:NVDA), The Walt Disney Company (NYSE:DIS), and NIKE, Inc. (NYSE:NKE), among others, are thus seeing significant decreases in their stock prices. Many are trading at historically low levels, offering investors the opportunity to buy them while they are affordable.
However, the S&P 500 has begun its recovery. In October, the broader benchmark posted gains of 7.99% for the month. Technology stocks are getting hammered while energy and certain healthcare stocks are doing really well this year. Overall, the benchmark is still down 18.76% year-to-date. As a result, now is the best time to buy renowned companies at a discounted rate, to benefit from future profits.
Image by Sergei Tokmakov Terms.Law from Pixabay
Many investors believe that the stock market is efficient. We disagree. The 52-week price range for NVIDIA Corporation (NVDA) is $108 and $346. That's an extremely wide range. Was NVDA efficiently priced when it was trading at $346? How about at $108? Did the future cash flows of NVDA go down by two thirds in a matter of 12 months? We believe the stock market gets overly pessimistic right before the market bottoms and that's usually a very good time to buy for long-term investors. Selling stocks when the earnings and the P/E multiples peak is also a good idea. We don't think we are near the bottom yet, but we are getting close. It is time to get prepared which is why we are going to take a look at the following 10 stocks that we can buy on sale and stay invested for the long-term.
Our Methodology:
For our list below, we have selected stocks with significant long-term growth potential despite their share prices falling this year. We have considered current projects and operations the companies are involved in to determine whether they are truly on the path to growth in the long term. We have also looked at key fundamentals such as their revenue and free cash flow growth and guidance, alongside looking at analyst ratings and price targets. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest.
Stocks to Buy on Sale and Never Look Back
10. Walker & Dunlop, Inc. (NYSE:WD)
Number of Hedge Fund Holders: 16
Share Price as of November 4: $81.93
Walker & Dunlop, Inc. (NYSE:WD) is a financial company that originates, sells, and services a variety of multifamily and other commercial real estate financing products and services through its subsidiaries. The company offers first mortgage, second trust, supplemental, construction, mezzanine, preferred equity, small-balance, and bridge/interim loans. It is based in Bethesda, Maryland.
The company is down 50% from its recent highs, as of November 3. The company is currently trading for less than 10x its forward earnings. Walker & Dunlop, Inc. (NYSE:WD) is however growing into a leader in commercial real estate finance. It sees more opportunities in the market this year, and has an operating revenue of $226 million, which is 24% higher than its $184 million operating revenue in the first quarter of 2021. While there is general pessimism in the commercial real estate market, Walker & Dunlop, Inc. (NYSE:WD) is poised to remain unfazed and grow to unprecedented highs, making now the best time to buy the stock before it gets too expensive.
MD Sass was the largest stakeholder in Walker & Dunlop, Inc. (NYSE:WD) in the second quarter, holding 327,036 shares worth $31.5 million. In total, 16 hedge funds were long the stock, with a total stake value of $100.3 million.
Walker & Dunlop, Inc. (NYSE:WD), like NVIDIA Corporation (NASDAQ:NVDA), The Walt Disney Company (NYSE:DIS), and NIKE, Inc. (NYSE:NKE), is among the best stocks to buy on the dip at present.
9. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 46
Share Price as of November 4: $13.26
Ford Motor Company (NYSE:F) is an automobile manufacturer that services a range of Ford trucks, cars, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles across the globe. The company operates through its Automotive, Mobility, and Ford Credit segments, and it is based in Dearborn, Michigan. It also offers wholesale loans to dealers to finance the purchase of vehicle inventory.
An Overweight rating was reiterated on shares of Ford Motor Company (NYSE:F) by Adam Jonas at Morgan Stanley on October 27.
Ford Motor Company (NYSE:F) is trading exceptionally cheap right now, but the company shows room for share price growth based on strong fundamentals. The company raised its free cash flow guidance for 2022 this October, bringing it up to $9.5 billion - $10 billion, compared to the previous figures of $5.5 billion - $6.5 billion. Ford Motor Company (NYSE:F) also saw a 10% year-over-year increase in its revenue in the third quarter.
Out of 895 hedge funds tracked in the second quarter, 46 funds were long Ford Motor Company (NYSE:F), with a total stake value of $608.8 million. In comparison, 46 funds were long the stock in the previous quarter as well, with a total stake value of $1.2 billion.
Leaven Partners, an investment management firm, mentioned Ford Motor Company (NYSE:F) in its third-quarter 2022 investor letter. Here's what the firm said:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
8. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 55
Share Price as of November 4: $84.68
Starbucks Corporation (NASDAQ:SBUX) is a consumer discretionary company operating as a roaster, marketer, and retailer of specialty coffee across the glove. The company operates through its North America, International, and Channel Development segments and offers coffee and tea beverages, roasted whole beans and ground coffee, single-serve products, and ready-to-drink beverages across its stores internationally. It is based in Seattle, Washington.
Joshua Long at Stephens initiated coverage of Starbucks Corporation (NASDAQ:SBUX) shares on September 22 with an Equal Weight rating and a $91 price target.
Starbucks Corporation (NASDAQ:SBUX) is a blue-chip stock you can buy today at a bargain since it has historically been undervalued by 16%, yet has the ability to deliver returns of almost 150% within the next five years. The company's management is guiding for 17%-22.5% CAGR long-term returns, and analysts also think 17% is likely. Starbucks Corporation (NASDAQ:SBUX) boosted its growth outlook by 2% annually in the long-term growth plan outlined in the company's 2022 investor day held this September. The company has also guided for 10%-12% annual sales growth.
Bailard Inc was the largest stakeholder in Starbucks Corporation (NASDAQ:SBUX) in the second quarter, holding 71,319 shares worth $6 million. There were 55 hedge funds long the stock in total, with a total stake value of $1.4 billion.
Polen Capital, an investment management firm, mentioned Starbucks Corporation (NASDAQ:SBUX) in its second-quarter 2022 investor letter. Here's what the firm said:
“Starbucks, which garners a lower weighting in the Portfolio, had slightly better than average three-month performance. Samestore sales were up double-digits in the U.S. and International exChina, with solid revenue growth across those regions. The company is experiencing cost pressures from wages and input costs though, and China same-store sales were down 23% due to zero-COVID policy restrictions and lockdowns.”
7. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
Share Price as of November 4: $90.40
NIKE, Inc. (NYSE:NKE) is a footwear company that designs, develops, markets, and sells men's women's, and kids' athletic footwear, apparel, equipment, and accessories across the globe. The company provides its products under the Jumpman, Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks. It is based in Beaverton, Oregon.
Raymond James' Rick Patel initiated coverage of NIKE, Inc. (NYSE:NKE) shares on October 13 with an Outperform rating and a $99 price target.
While current market headwinds make most investors wary of NIKE, Inc. (NYSE:NKE), the company's strong fundamentals cannot go ignored. It has managed to beat earnings estimates for the past four quarters consistently. In the fiscal first quarter of 2023, the company's EPS was $0.93, beating estimates by $0.01. Its revenue was $12.69 billion, up 3.58% year-over-year, and beating estimates by $399.97 million. NIKE, Inc. (NYSE:NKE) was also the biggest gainer in the Dow 30 stocks at the start of October, rising 3.25% and coming up to more than 12% in partial recovery. The company's robust fundamentals and persistence in maintaining earnings records can lead to its further growth in the coming years, especially as recession fears die down.
NIKE, Inc. (NYSE:NKE) was found among the 13F holdings of 72 hedge funds in the second quarter, and 67 funds in the previous quarter. Their total stake values were $3.3 billion and $3.9 billion, respectively.
RiverPark Funds, an investment management company, mentioned NIKE, Inc. (NYSE:NKE) in its third-quarter 2022 investor letter. Here's what the firm said:
“Nike: NKE shares were a top detractor this quarter on higher inventory balances leading to lower-than-expected gross margins for the next couple of quarters. The company reported 1Q23 sales and EPS beats, but freight costs, markdowns, and the strong dollar weighed on gross margins. Nike continues to expect low double-digit currency-neutral sales growth, but the strong dollar will reduce overall sales growth and discounted inventory will further reduce gross margins for the year.
Nike is, by far, the leading athletic footwear, apparel, and equipment company in the world with over $46 billion in revenue, $6 billion in 2021 annual free cash flow, and over $4 billion of excess cash. After working through its near-term currency and gross margin issues, we expect the company to return towards management’s guidance of at least 10% annual revenue growth, and return to its accelerating profit growth, as longer-term we expect margins to be materially aided by rising average sales prices (from both increased pricing and a mix shift to more premium products), the company’s deep innovation pipeline, a secular shift from the company’s traditional wholesale channels to a more direct-to-consumer approach (now 35% of revenues up from 16% ten years ago), and a more streamlined supply chain. We believe that the continued global secular growth trend towards active wear will continue to aid Nike’s top-line growth, while we expect the combined gross and operating margin improvements from its initiatives will drive long-term mid-teens or higher annual EPS growth for the foreseeable future.”
6. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
Share Price as of November 4: $134.21
NVIDIA Corporation (NASDAQ:NVDA) is an information technology company providing graphics, and compute and networking solutions in the US, Taiwan, China, and internationally. The company is a key player in the semiconductor space, and is based in Santa Clara, California. Its products are used in the gaming, professional visualization, data center, and automotive markets.
A Buy rating was reiterated on shares of NVIDIA Corporation (NASDAQ:NVDA) on October 25 by analyst Rajvindra Gill at Needham. The analyst also placed a $155 price target on the stock.
NVIDIA Corporation (NASDAQ:NVDA) has shown strong forward guidance estimates for the next five years, showing that investing in the company now will be smart seeing as it is set to keep growing in the future. This October, the company's shares were down by 56% over the past year, meaning the time is perfect to buy the stock at a bargain. NVIDIA Corporation (NASDAQ:NVDA) has a significant upside potential of 44%-45%.
Catherine Wood's ARK Investment Management was the largest stakeholder in NVIDIA Corporation (NASDAQ:NVDA) in the second quarter, holding 1.4 million shares worth $167.8 million. In total, 84 hedge funds were long the stock, with a total stake value of $3.3 billion.
Baron Funds, an investment management company, mentioned NVIDIA Corporation (NASDAQ:NVDA) in its third-quarter 2022 investor letter. Here's what the firm said:
“NVIDIA Corporation (NASDAQ:NVDA) is a fabless semiconductor company and a leader in gaming and accelerated computing. NVIDIA is powering the growth of AI from the data center to the edge. Shares detracted due to inventory right sizing in NVIDIA’s gaming segment coupled with the broader market sell-off in growth stocks. Given NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines, along with the size of these markets, we believe the company can sustain its growth trajectory. See further discussion of NVIDIA in the top net purchases section below.
During the third quarter, we took advantage of its stock sell-off to add to NVIDIA Corporation, a fabless semiconductor mega cap that is a global leader in gaming cards and accelerated computing hardware and software. The sell-off was driven by a near-term inventory correction in gaming as a result of a COVID-related pull forward in demand as well as the shift in the Ethereum cryptocurrency from proof-of-work to proof-of-stake. Additionally, investors are concerned over the potential slowdown in data center revenues as a result of a weaker macroeconomic environment as well as the recently announced limitations on semiconductor shipments to China. Despite the near-term uncertainty, we believe that NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines, along with the size of these markets, would enable the company to benefit from durable growth for years to come and therefore view the stock price where we added shares as a compelling value for long-term investors. With demand for computing power doubling every one to two years, and Moore’s Law slowing down, there is more need for computing than ever. At the same time, “near free” supply growth (that was possible thanks to Moore’s Law) has slowed dramatically. NVIDIA’s accelerated architecture, with parallel computing at scale, answers that need.”
NVIDIA Corporation (NASDAQ:NVDA), like The Walt Disney Company (NYSE:DIS) and NIKE, Inc. (NYSE:NKE), is a growth stock forecasted to continue beating the market in the coming years. As such, it is the best stock to buy while it's still affordable.
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Disclosure: None. 10 Stocks to Buy on Sale and Never Look Back is originally published on Insider Monkey.
