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“Buying the dip” is one of the most common strategies discussed in the stock market. This is prevalent with momentum stocks and high performers. However, as optimism grows for stock favorites, so does the irrational exuberance surrounding companies that don’t have the financials to support it. This has led to the rise of stocks to buy on the dip.
This can sometimes lead to investors buying at the top and getting “left holding the bag” as prices drop to reasonable levels. But the possibility of buying at the top shouldn’t deter investors. Instead, it should push them to be more cautious with their selections.
This is where due diligence comes into play. It is essential to understand what’s the story that’s driving prices up. Is it just because of something unsubstantiated circulating around the rumor mill? Or is it growth prospects and high valuations? One thing is certain: those with favorable financials and growth prospects are worth looking for.
This article will look at three stocks to buy on the dip that investors should buy right now.
Microsoft Corporation (MSFT)
Microsoft Corporation (NASDAQ:MSFT) is a technology company best known for its Windows OS and Office solutions. It has been one of the most high-performing megacap stocks in the market and is currently up by over 40% YTD. It is one of the companies carrying the S&P500’s performance and pushing it to positive territory this year.
MSFT has been at the forefront of AI development with its $10 billion investment in ChatGPT. The company has been developing its integration of ChatGPT into the Bing search engine and Edge browser. ChatGPT is also being offered as part of its AzureOpen AI service. In addition, the company has also noted that its Azure AI Studio has become the most opted choice for AI development, and its Copilot in Power Virtual Agents has increased customer service agents’ workforce productivity.
Microsoft started correcting after hitting its $366.78 high earlier this year and given the growing AI trend and prospects of MSFT, we think this could be an excellent opportunity to buy.
Meta Platforms (META)
The next on the list is another tech mega-cap. Meta Platforms (NASDAQ:META) came back swinging from its October lows and is now up a whopping 146% YTD. META owns the world’s largest social media platform, Facebook. The company has provided consumers and businesses with a social media platform and expanded its business with its acquisitions and development in the virtual reality space. Most of the company’s revenue comes from its ad sales through its website and applications.
According to its last financial report, the company has been recovering its market share as daily average users have increased by 5%. Revenue was also up 11% YoY at just under $32 billion. Today, META continues implementing cost-cutting plans to optimize the business further, realign strategic priorities, and consolidate facilities through restructuring. This has helped Meta Platforms increase its operating margin by 29%. This makes it one of those stocks to buy on the dip.
In addition, the company has announced an increase in its buy-back program of $40 billion to further add shareholder value. These efforts to streamline business, increase its operating margin, and improve shareholder value are signs that this dip may be an opportunity to buy more stock.
Tesla (NASDAQ:TSLA) is an electric vehicle (EV) and clean energy company best known for its electric cars, with its major credit to fame being the release of its electric Roadster. The Roadster was an eco-friendly alternative that performed similarly to gasoline-powered sports cars. This has led TSLA to be one of the most successful independent automakers, and today, the company has a significant influence on the Electric Vehicle industry. Its proprietary NACS (North Americal Charging Stanard) is considered the gold standard in EV charging, and announcements have been made that other automakers will adopt the technology.
Tesla’s Cybertruck production and growing number of factories are drivers that we think will help support its growth. Its upcoming Mexico facility is expected to produce at least one million electric cars per year. The German factory, meanwhile, has applied to local authorities to double its production from 500,000 to 1,000,000 EVs per annum. These are all part of Elon Musk’s annual goal of producing 20 million vehicles a year. Talk about aggressive growth.
TSLA’s Cybertruck is also rumored to be released in its fall delivery event and has almost two million preorders.
On the date of publication, Rick Orford held long positions in MSFT and TSLA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.