Despite U.S. markets reaching record highs, some stocks are moving in the opposite direction. Many registered lows for the year in the past week. Analysts also worry that a few tech and artificial intelligence (AI) stocks are primarily driving the market. A rotation into some stocks to buy on the dip can be expected.
Often, participants focus on growth stocks leading the charge. However, this can leave many stocks to buy in the dip as long as they have compelling valuations and robust financials. Those “left behind” can see upward momentum while incurring less downside risk than their high-flying growth counterparts.
With the broader market expected to continue its run over the course of the year, companies that have outperformed but maintain strong fundamentals may be winning investments for investors seeking stocks to buy on the dip.
A pause in market activity can present opportunities to identify some rock-solid stocks offering good value, including potential stocks to buy on the dip.
Comcast Corporation (CMCSA)
The media conglomerate Comcast Corporation (NYSE:CMCSA) is the first of the stocks to buy on the dip. Its share price has declined around 10% from its 2024 high earlier in January.
CMCSA has a diversified portfolio encompassing cable and broadcast television assets. Of particular interest is its focus on expanding broadband infrastructure. This places the company in a good position to benefit from the shift towards streaming services. Additionally, its higher-margin theme parks division continues to see pent-up demand.
The company recently increased its dividend payout, bringing the dividend yield close to the industry average. This adds confidence that management views the company’s financial position and trajectory positively.
Comcast trades on a price-to-earnings (P/E) ratio of just 11.5x. Most analysts rate the stock as a buy and expect the share price to recover to its 2024 highs.
Philip Morris (PM)
The world’s largest tobacco company, Philip Morris (NYSE:PM), is the second pick of the stocks to buy on the dip. PM has remained largely unaffected by recent movements in AI-driven stocks, with its share value essentially static compared to twelve months ago.
Investors are cautious about investing in the tobacco business, as global cigarette sales have witnessed a downtrend. However, tobacco corporations are diversifying into other product categories, such as heated tobacco, which are experiencing growth and could sustain long-term business viability.
The company trades on a P/E ratio of 18.1x, below the S&P 500 index average of 28.4x. Analyst price targets average $108.85 per share, representing a potential upside of approximately 20% from the current $90.88. With a sizable dividend yield of 5.7%, PM is the second of the stocks to buy on the dip.
American Water Works (AWK)
When considering value stocks, utilities typically offer a good thesis. American Water Works (NYSE:AWK) stands out as the third of the stocks to buy on the drip, as its share price is down 18% year-to-date (YTD). It follows a period of acquisition activity and recent investments poised to strengthen operations in the longer term. The newly acquired assets may present opportunities to augment profits and complement recently secured military contracts.
American Water’s shares have outperformed the industry. However, analysts remain optimistic about the stock’s outlook, anticipating a recovery to $138.27 per share. AWK currently trades at a P/E multiple of 24x. At the end of 2022, AWK traded hands at a P/E ratio of 33.8x, a marked underperformance to be one of the stocks to buy on the dip.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
