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6 Stocks to Buy on the Dip With Strong Upside Left for 2021
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Wall Street completed an impressive first half of 2021 after a stellar run in 2020 despite the pandemic. The momentum has continued so far in the second half. On Aug 12, the Dow and the S&P 500 recorded fresh all-time highs while the Nasdaq Composite is less than 1% below its all-time high.
In fact, market's benchmark — the S&P 500 Index — completed a six-month winning streak after declining in January. In the first seven months of this year, the tech-heavy Nasdaq Composite ended in red only in May. The blue-chip Dow dropped in January and fell marginally in June.
This shows that Wall Street has remained in the growth trajectory so far this year, with the Dow, the S&P 500 and the Nasdaq Composite up 16%, 18.8% and 15%, respectively. The tempo is likely to prevail for the rest of 2021 too.
U.S. Economic Fundamentals Remain Solid
Supported by the nationwide COVID-19 vaccination drive, the U.S. economy is witnessing a robust recovery from the pandemic-led disturbances. U.S. manufacturing is firing on all cylinders, and the services sector is also thriving. The labor market is settling down gradually. Consumer satisfaction optimization indexes remain elevated.
U.S. businesses across sizes are expanding their scale of operations and hiring more despite soaring wages and salaries to cater to robust demand. The personal savings of Americans are around an astonishing $2 trillion. The sky-high savings are allowing people to indulge in their demands that were pent up during lockdowns and are in turn compelling businesses to expand their scale of operations.
Two Major Catalysts
On Aug 10, the U.S. Senate, in a majority vote of 69-30, passed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. Total spending may go up to $1.2 trillion if the plan is extended to eight years. The bill is now headed for the House of Representatives for discussions and vote.
The proposed bill will provide federal money into physical infrastructure projects such as roads, bridges, passenger rails, airports, drinking water and waste-water systems, high-speed Internet and climate-related infrastructure.
As the infrastructure bill has passed Senate, the Democrats will now focus on passing a budget measure allowing them to approve a separate $3.5 trillion spending package. The bill includes provision of $726 billion for universal pre-school for 3-year and 4-year old kids, $198 billion for clean energy development, $332 billion to the Banking Committee for investment in public housing, housing affordability, and so on.
Also, $135 billion is allotted to the Committee on Agriculture Nutrition and Forestry, and would include instructions to address forest fires, carbon emission reduction and ways to address drought-related concerns.
Our Top Picks
We have narrowed down our search to six large-cap (market capital > $10 billion) stocks that have attained a 52-week high this year but are currently trading at a sharp discount.
These stocks have strong growth potential for the rest of 2021 and have witnessed solid earnings estimate revisions within the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our six picks year to date.
Image Source: Zacks Investment Research
Chewy Inc. (CHWY - Free Report) operates as an online pet retailer. It offers pet products which include dry and wet food, toys, mats, biscuits, vitamins and supplements. It also provides pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its chewy.com retail Website, as well as its mobile applications.
The company has an expected earnings growth rate of 33.3% for the current year (ending January 2022). The Zacks Consensus Estimate for current-year earnings improved 20% over the last 30 days. This Zacks Rank #2 stock is currently trading at a 20.8% discount from its 52-week high attained on Feb 16.
Pinterest Inc. (PINS - Free Report) provides a platform to show its users (called Pinners) visual recommendations (called Pins) based on their personal taste and interests. Users then save and organize these recommendations into collections (called Boards).
Availability of features like Shopping List and Idea Pins are the key catalysts. The growing Gen Z and millennial user base is a key driver for the long haul. Also, enhanced product offerings, new conversion insights, simplified ad systems through Verified Merchant Program and improved advertisers’ ability to measure the effectiveness of their ad spend are expected to aid advertising revenues in the near term.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 36.3% over the last 30 days. This Zacks Rank #2 stock is currently trading at a 36.9% discount from its 52-week high attained on Feb 16.
Schlumberger Ltd. (SLB - Free Report) supplies technology for reservoir characterization, drilling, production, and processing to the oil and gas industry worldwide. It operates in four divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems.
Schlumberger is the largest oilfield services player, with a presence in every energy market across the globe. Being the leading provider of technology for complex oilfields, it is better positioned to take up new offshore projects in international markets. The company is targeting net-zero greenhouse gas emissions by 2050.
The company has an expected earnings growth rate of 80.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 8.8% over the last 30 days. This Zacks Rank #2 stock is currently trading at a 22.6% discount from its 52-week high attained on Jun 4.
EOG Resources Inc. (EOG - Free Report) explores, develops, produces and markets crude oil, and natural gas and natural gas liquids in the United States and internationally. The upstream energy player has an attractive growth profile, huge inventory of drilling opportunities, upper quartile returns and a disciplined management team. It has significant acreages in oil shale plays like Permian, Bakken and Eagle Ford.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.4% over the last 7 days. This Zacks Rank #1 stock is currently trading at a 20.7% discount from its 52-week high attained on Jun 7.
Roku Inc. (ROKU - Free Report) is the leading TV streaming platform provider in the United States based on the hours streamed. The company operates in two segments, Platform and Player.
Roku generates revenues from subscriptions and advertising, with the latter offering long-term potential for sustainable growth. Its acquisition of the demand-side platform, Dataxu will position the streaming service provider to compete more fiercely for ad dollars as it shifts from the $70 billion linear TV market to digital platform.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved more than 100% over the last 7 days. This Zacks Rank #2 stock is currently trading at a 24.7% discount from its 52-week high attained on Jul 27.
Moderna Inc. (MRNA - Free Report) is a biotechnology company, which develops therapeutics and vaccines based on messenger RNA for the treatment of infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases.
The company’s COVID-19 vaccine demonstrated strong uptake in multiple countries where it received authorization for temporary use in the past few months. It expects more than $19 billion in vaccine sales in 2021. Advance purchase agreements with several countries worth $20 billion in aggregate for 2022 is already in place.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 13.4% over the last 7 days. This Zacks Rank #2 stock is currently trading at a 21.3% discount from its 52-week high attained on Aug 10.
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6 Stocks to Buy on the Dip With Strong Upside Left for 2021
Wall Street completed an impressive first half of 2021 after a stellar run in 2020 despite the pandemic. The momentum has continued so far in the second half. On Aug 12, the Dow and the S&P 500 recorded fresh all-time highs while the Nasdaq Composite is less than 1% below its all-time high.
In fact, market's benchmark — the S&P 500 Index — completed a six-month winning streak after declining in January. In the first seven months of this year, the tech-heavy Nasdaq Composite ended in red only in May. The blue-chip Dow dropped in January and fell marginally in June.
This shows that Wall Street has remained in the growth trajectory so far this year, with the Dow, the S&P 500 and the Nasdaq Composite up 16%, 18.8% and 15%, respectively. The tempo is likely to prevail for the rest of 2021 too.
U.S. Economic Fundamentals Remain Solid
Supported by the nationwide COVID-19 vaccination drive, the U.S. economy is witnessing a robust recovery from the pandemic-led disturbances. U.S. manufacturing is firing on all cylinders, and the services sector is also thriving. The labor market is settling down gradually. Consumer satisfaction optimization indexes remain elevated.
U.S. businesses across sizes are expanding their scale of operations and hiring more despite soaring wages and salaries to cater to robust demand. The personal savings of Americans are around an astonishing $2 trillion. The sky-high savings are allowing people to indulge in their demands that were pent up during lockdowns and are in turn compelling businesses to expand their scale of operations.
Two Major Catalysts
On Aug 10, the U.S. Senate, in a majority vote of 69-30, passed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. Total spending may go up to $1.2 trillion if the plan is extended to eight years. The bill is now headed for the House of Representatives for discussions and vote.
The proposed bill will provide federal money into physical infrastructure projects such as roads, bridges, passenger rails, airports, drinking water and waste-water systems, high-speed Internet and climate-related infrastructure.
As the infrastructure bill has passed Senate, the Democrats will now focus on passing a budget measure allowing them to approve a separate $3.5 trillion spending package. The bill includes provision of $726 billion for universal pre-school for 3-year and 4-year old kids, $198 billion for clean energy development, $332 billion to the Banking Committee for investment in public housing, housing affordability, and so on.
Also, $135 billion is allotted to the Committee on Agriculture Nutrition and Forestry, and would include instructions to address forest fires, carbon emission reduction and ways to address drought-related concerns.
Our Top Picks
We have narrowed down our search to six large-cap (market capital > $10 billion) stocks that have attained a 52-week high this year but are currently trading at a sharp discount.
These stocks have strong growth potential for the rest of 2021 and have witnessed solid earnings estimate revisions within the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our six picks year to date.
Image Source: Zacks Investment Research
Chewy Inc. (CHWY - Free Report) operates as an online pet retailer. It offers pet products which include dry and wet food, toys, mats, biscuits, vitamins and supplements. It also provides pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its chewy.com retail Website, as well as its mobile applications.
The company has an expected earnings growth rate of 33.3% for the current year (ending January 2022). The Zacks Consensus Estimate for current-year earnings improved 20% over the last 30 days. This Zacks Rank #2 stock is currently trading at a 20.8% discount from its 52-week high attained on Feb 16.
Pinterest Inc. (PINS - Free Report) provides a platform to show its users (called Pinners) visual recommendations (called Pins) based on their personal taste and interests. Users then save and organize these recommendations into collections (called Boards).
Availability of features like Shopping List and Idea Pins are the key catalysts. The growing Gen Z and millennial user base is a key driver for the long haul. Also, enhanced product offerings, new conversion insights, simplified ad systems through Verified Merchant Program and improved advertisers’ ability to measure the effectiveness of their ad spend are expected to aid advertising revenues in the near term.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 36.3% over the last 30 days. This Zacks Rank #2 stock is currently trading at a 36.9% discount from its 52-week high attained on Feb 16.
Schlumberger Ltd. (SLB - Free Report) supplies technology for reservoir characterization, drilling, production, and processing to the oil and gas industry worldwide. It operates in four divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems.
Schlumberger is the largest oilfield services player, with a presence in every energy market across the globe. Being the leading provider of technology for complex oilfields, it is better positioned to take up new offshore projects in international markets. The company is targeting net-zero greenhouse gas emissions by 2050.
The company has an expected earnings growth rate of 80.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 8.8% over the last 30 days. This Zacks Rank #2 stock is currently trading at a 22.6% discount from its 52-week high attained on Jun 4.
EOG Resources Inc. (EOG - Free Report) explores, develops, produces and markets crude oil, and natural gas and natural gas liquids in the United States and internationally. The upstream energy player has an attractive growth profile, huge inventory of drilling opportunities, upper quartile returns and a disciplined management team. It has significant acreages in oil shale plays like Permian, Bakken and Eagle Ford.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.4% over the last 7 days. This Zacks Rank #1 stock is currently trading at a 20.7% discount from its 52-week high attained on Jun 7.
Roku Inc. (ROKU - Free Report) is the leading TV streaming platform provider in the United States based on the hours streamed. The company operates in two segments, Platform and Player.
Roku generates revenues from subscriptions and advertising, with the latter offering long-term potential for sustainable growth. Its acquisition of the demand-side platform, Dataxu will position the streaming service provider to compete more fiercely for ad dollars as it shifts from the $70 billion linear TV market to digital platform.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved more than 100% over the last 7 days. This Zacks Rank #2 stock is currently trading at a 24.7% discount from its 52-week high attained on Jul 27.
Moderna Inc. (MRNA - Free Report) is a biotechnology company, which develops therapeutics and vaccines based on messenger RNA for the treatment of infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases.
The company’s COVID-19 vaccine demonstrated strong uptake in multiple countries where it received authorization for temporary use in the past few months. It expects more than $19 billion in vaccine sales in 2021. Advance purchase agreements with several countries worth $20 billion in aggregate for 2022 is already in place.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 13.4% over the last 7 days. This Zacks Rank #2 stock is currently trading at a 21.3% discount from its 52-week high attained on Aug 10.