While it’s a relative rarity because price generally discounts everything, that doesn’t mean you can’t find stocks to buy on dip. With thousands upon thousands of securities available, it’s impossible for analysts to track them all with equal weight. Further, the “in” securities tend to attract the most attention. After all, Wall Street isn’t about promoting a free and fair democracy.
Instead, it’s about greed and hoarding as much profitability as possible and sticking losses to the other guy. But again, this activity tends to concentrate on companies that for whatever reasons have attracted the spotlight. Those outside the spotlight could find themselves trading below their fundamental, technical or perceived intrinsic value.
With that in mind, there are some ideas that the Street just isn’t paying attention to. That’s the market’s loss and your gain. Below are compelling stocks to buy on dip.
At first glance, it’s easy to want to give up on pharmaceutical giant Pfizer (NYSE:PFE). While the company may have won the Covid-19 vaccine wars, the problem is that no one’s scared of the SARS-CoV-2 virus anymore. Society has returned to normal, which is good for all of us but not so much for Pfizer stakeholders. It’s off to a poor start in 2024. Also, PFE is down more than 38% in the past 52 weeks.
That’s going to be a “yikes!” for anyone. However, the bears may have bitten off more than they could chew. Looking at data from Fintel, we see that the gamma exposure for PFE stock options sits at -$21.23 million per every 1% move in the underlying security (in the open market). What’s driving this intense gamma exposure is a high volume of institutional sold calls. These are bets that PFE won’t rise above predefined strike prices.
However, if PFE does rise above these strikes, then an obligation to fulfill the terms of the options contracts comes into play. Moreover, market makers must take the opposite side of the wager to balance their delta. With so many bets on one side of the trade, some good news – such as Pfizer’s combined Covid/flu vaccine candidate – could make things very interesting for bullish contrarians.
With oil-producing nations’ efforts to lift the price of the underlying commodity via production cuts failing, circumstances don’t look bright for Halliburton (NYSE:HAL). Per its public profile, it’s one of the world’s largest oil service companies. It’s also responsible for most of the globe’s largest fracking operations. But with prices down (relatively speaking), that doesn’t seem to bode well for the demand profile.
Indeed, HAL has seen a decline of over 9% in the trailing one-year period. It’s also off to a less-than-auspicious start to the new year. Nevertheless, HAL makes for one of the stocks to buy on dip. Essentially, it comes down to the fundamentals. Yes, demand may have been down. However, with the U.S. jobs market continuing to blow past forecasts, it’s a logical equation: more people, more jobs, more consumption of resources.
Further, HAL represents one of the stocks to buy on dip because of a possible gamma squeeze brewing. Right now, the gamma exposure of the market makers sits at -$7.05 million per every 1% move in HAL stock. Adding to the pressure is the high volume of sold calls that are going to expire soon. But if HAL sees upward mobility, that could spell trouble for the bears.
Also, look at the analyst rating: a unanimous strong buy with a $47.33 average price target.
A gold mining specialist, Newmont (NYSE:NEM) presents an interesting case. Per its public profile, it’s the world’s largest gold-mining corporation. However, that doesn’t mean jack for Wall Street. Since the beginning of the year, NEM lost almost 16% of its equity value. Over the trailing 52 weeks, the security stumbled almost 28%. A candidate for stocks to buy on dip? That’s a pretty big dip.
However, the bearishness in my opinion doesn’t seem to align with the fundamentals. For one thing, the price of gold is up around 9%, almost 10% over the trailing year. Second, as stated earlier, more people have more jobs, which implies increased spending and overall money velocity. That’s inflationary. Further, the Federal Reserve hinted at reducing borrowing costs. That’s also inflationary or at the very least not disinflationary.
Plus, gold and the other resources Newmont mines are critical for various innovative industries, including electric vehicles. Notably, NEM options feature a gamma exposure of -$560,000 for every 1% move in the underlying security. Fintel notes that NEM has a high chance of a gamma squeeze occurring, which is driven in large part by sold calls in the options flow screener.
Such bearish bets seem risky because analysts rate shares a consensus moderate buy with a $48.05 price target. Thus, Newmont is one of the stocks to buy on dip.
On the date of publication, Josh Enomoto 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.