SHAK - The 7 Best Stocks to Buy on a Dip

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Anyone could easily take a look at stocks right now and justify throwing in the towel. The major indices just reached their lowest level of 2022, a year in which they’ve performed terribly. Many, if not most, experts, are predicting that a recession is around the corner. But despite all of the reasons to be bearish, I still see multiple reasons to be upbeat and to snap up the best stocks to buy on the dip now.

Since I’ve been closely following stocks, there have been four previous times when, despite intense challenges and seemingly terrible outlooks, the markets ultimately made huge comebacks.

In late 2008 and early 2009, many people warned that the financial system could totally collapse, while in 2010 and 2011, some experts and many investors believed that the eurozone could fall apart, triggering a worldwide economic crisis.

At the end of 2018, worries about an impending recession, triggered by a Fed rate hike, caused panic on Wall Street and a sharp decline in technology stocks. Finally, in April 2020, almost everyone was convinced that the coronavirus would send the global economy into a depression that would wreck the stock market.

Of course, all of those fears turned out to be unfounded, and American stocks ultimately rose tremendously after all of those crises. And, with the exception of December 2018, the fundamentals of the U.S. economy are much stronger now than they were during all of the prior crises.

Therefore, I believe that stocks will ultimately be much higher in a year than they are now and long-term investors should be purchasing these best stocks to buy on the dip now.

JinkoSolar (JKS)

Like many solar stocks, JinkoSolar (NYSE:JKS), after initially jumping following the passage of the new energy law, has tumbled along with the stock market in recent weeks. Indeed, the shares sank 13.5% between Sept. 13 and Sept. 29.  (8.5/62.9).

I believe that the reason for the downturn of the solar stocks, including JKS, is the pessimism about the outlook of the American solar sector for 2023 that has been expressed recently by research firm Wood McKenzie.

The firm asserted that, due to supply constraints and a law passed by Congress meant to prevent products made by Chinese slaves being imported into the U.S., there would not be enough solar modules available to meet demand in America until 2024.

However, given the Biden administration’s strong commitment to renewable energy in general and solar energy in particular, I doubt whether it will enforce the anti-slavery law to such an extent that a major shortage of solar energy would be created.

Moreover, sometimes the Street seems to forget that America is not the whole world or even most of the world. In fact, Americans account for less than 5% of the world’s population.

So it’s not entirely surprising that JKS, despite multiple constraints in the U.S., reported that its solar module shipments in Q2 had jumped about 27% versus Q1 and stated that the “demand for solar products has exploded in many markets.”

With these trends likely to continue and the prices of polysilicon (a key raw material of solar panels) expected to drop in 2023, Jinko’s top and bottom lines are likely to boom next year.

ShakeShak (SHAK)

When I pass or go into ShakeShak (NYSE:SHAK) restaurants, there always seem to be a lot of people inside. Moreover, the performance of U.S. restaurants seems to have rebounded significantly last month, while ShakeShak’s financial results have improved meaningfully versus pre-pandemic levels. Finally, the price-sales ratio of SHAK stock is very attractive.

A survey of restaurants found that their same-store sales had risen 7% last month versus September 2021, up from a 5% YOY gain in August and a 4% YOY increase in July.

Last month, their sales climbed 19% versus September 2019. The data shows that the macro environment is not as negative for restaurants as many pundits and analysts claim, boding well for ShakeShak’s financial results going forward.

For Q2, SHAK reported that its “same-Shak” sales had climbed 10% YOY, while it generated an impressive restaurant-level operating margin of 18.8%. Finally, the company’s EBITDA, excluding certain items, climbed 7% YOY to $22 million.

Aurora Innovation (AUR)

As I noted in previous columns, Aurora (NASDAQ:AUR) develops software that “enables trucks to be driven autonomously,” and the company is conducting advanced trials with FedEx (NYSE:FDX) that appear to be very successful so far, while it also received an investment from Amazon (NASDAQ:AMZN).

For long-term investors, it’s worth noting that Intel’s (NASDAQ:INTC) Mobileye, which also develops technology for autonomous vehicles, is expected to have a $30 billion valuation during its upcoming IPO. Conversely, Aurora’s market capitalization is just $2.6 billion.

So it’s not hard to see how AUR stock can zoom much higher in several years if its technology becomes widely adopted by major companies. Given Aurora’s alliances with FedEx and Amazon, it seems to have an excellent chance of achieving that goal.

Also worth noting is that Aurora’s CEO, Chris Urmson, has raised the possibility of selling the company, In my view, the CEO’s willingness to consider such a deal puts a floor under the stock and will prevent most short sellers from piling into the name.

Amazon (AMZN)

I’ve long believed that Amazon’s CEO, Andy Jassy, who took over for Jeff Bezos in July 2021, would expand the company more effectively into multiple, new markets than Bezos had.

And now that Jassy appears to be taking a completely different, more effective approach than Bezos when it comes to entering new sectors, I’m even more upbeat about Amazon’s future under Jassy. Specifically, Jassy appears ready to make major deals in order to quickly and effectively enter new spaces.

That’s my takeaway from Jassy’s recent decision to buy OneMedical, a major provider of primary healthcare services.

Over the last several years, Amazon’s efforts to disrupt the healthcare sector on its own have failed. But it should be much easier for AMZN to accomplish that goal if, through an acquisition, it quickly obtains the infrastructure and best practices that it needs to compete effectively in the sector.

In other words, by making a major acquisition, AMZN will be able to focus on disruptive innovations, rather than learning the business from scratch.

BlackBerry (BB)

As I reported in a previous column, BlackBerry’s (NYSE:BB) “two major businesses [QNX and cybersecurity] are heating up.”

What I did not note in that article is that the company’s IVY initiative –which I call its Auto App store– seems to be progressing very well, Moreover, QNX- its highly secure operating system — is moving way beyond its flagship market of vehicles.

As far as the Auto App store, CEO John Chen reported that the store’s current trials are “progressing well,” while BlackBerry is getting “requests for additional trials.” I agree with Chen’s assessment that these developments indicate that automakers’ demand for IVY is strong.

The CEO stated that the company would begin getting design wins for the app store in 2023. At that point, I expect Wall Street to start to become excited about the high revenue potential of the app store, boosting BB stock in the process.

I’m also excited about the expansion of QNX into multiple, large, additional vertical markets. Chen noted that QNX had multiple design wins “in the medical and industrial markets” in areas such as “surgical robotics, a retail distribution pick-and-pack robot as well as control for a nuclear power plant. ”

In the longer term, I believe that the expansion of QNX into new vertical markets will generate significant revenue for BlackBerry, meaningfully boosting BB stock.

JPMorgan (JPM)

As I noted in a previous column, “JPMorgan, like all banks, should benefit meaningfully from rising interest rates.”

Meanwhile, the bank’s decision, made on Sept. 20, to reinstate its $1 per share dividend rather than cutting it, gives me confidence in the bank’s outlook and stability. The dividend yield of JPM stock has now risen to a very attractive 3.83%.

Also making me more upbeat on the outlook of JPM stock are reports that the bank intends to hire 1,000 more employees for its British “digital retail bank” and add 2,000 additional tech workers by the end of the year. \

With many large companies cutting staff, JPMorgan’s decision to add more employees makes me believe that it is not too worried about a major deterioration of either the economy or its financial results.

The forward price-earnings ratio of JPM stock is now a tiny 8.5.

General Electric (GE)

Good news for Boeing (NYSE:BA) should lift General Electric (NYSE:GE) stock over the longer term since GE’s Aviation unit –the conglomerate’s largest division — makes and maintains the engines used in Boeing’s planes.

On Sept. 28, China Airlines of Taiwan announced that it would buy 16 of Boeing’s 787 Dreamliner planes. Meanwhile, on Oct. 3, the Wall Street Journal reported that airlines are being hit with shortages of new jets.

“The rebound in travel since [fears about the coronavirus declined] has airlines racing to keep up with demand,” the newspaper reported.

That means that the airlines will likely soon order many more of Boeing’s planes, lifting the revenue of GE’s Aviation unit over the longer term.

In recent weeks, GE stock has dropped after the conglomerate announced Q3 cash flow guidance that disappointed the street. However, Citi recently stated that the weaker-than-expected cash flow guidance was mostly caused by “timing.”

“A delay/push-out of several hundred million versus our model we think while notable does not meaningfully change our investment thesis, particularly in the current environment,” Citi noted.

On the date of publication, Larry Ramer owned shares of JKS, AUR, and GE.

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