While it has certainly been an eventful and volatile past year in the market given the huge selloff and subsequent rally to reach new all-time highs, investors need to avoid getting too caught up in the day-to-day movement of stocks. Instead, staying focused on identifying market-leading companies and adding shares at attractive entry points should be the priority. That way, you can avoid letting short-term volatility get to your head and always be moving forward with creating a winning portfolio.
How does one identify a market-leading stock? There are several qualities you might want to look for, yet this is more of an art rather than a science. Investors should keep an eye out for companies with strong business models that are poised for continued growth. It also helps to look for stocks that are breaking out to new highs and showing relative strength in their respective sectors. We’ve put together a list of 3 market-leading stocks to buy on dips to help you get a better sense of what companies might fit into your long-term investing plans.
1. Facebook
This market-leading tech company just jumped out to new all-time highs and should be one of the first names on your list of stocks to buy on dips. Facebook (NASDAQ:) is the world’s largest social media company that includes iconic platforms such as Facebook, Instagram, and WhatsApp. The company’s platforms have over 1.6 billion daily active users and are extremely attractive to advertisers, which is a big reason why this company is worth adding for the long term. Along with reporting 52% EPS growth and 33% year-over-year revenue growth in , Facebook stock has rallied over 14% year-to-date.
The bull thesis is fairly straightforward here – with so many users spending so much time on the company’s applications, Facebook possesses a treasure trove of user data that can be leveraged to market products in unique and personalized ways. Facebook’s ad revenue per user is growing, and there are plenty of long-term opportunities for the company to continue its growth trajectory. Keep in mind that ad spending is shifting from traditional media to online/digital channels, which is a trend that should continue for many years to come. There’s also some intriguing upside potential for the company’s Oculus AR/VR goggles, the possible monetization of WhatsApp, and Artificial Intelligence technology that could be further growth drivers.
2. Lennar Corporation
The homebuilders have been some of the hottest stocks in the market lately, and it’s fair to say that Lennar Corporation (NYSE:) is the best of the bunch. It’s one of the largest homebuilders in the United States and the number one homebuilder in the country by revenue. Lennar Corporation constructs homes for first-time, move-up, and active adult buyers and also provides various financial services such as mortgage financing. The company also has plans to spin off its start-up businesses to focus purely on homebuilding.
Thanks to a housing market boom that has created a fiercely competitive market environment, Lennar should see its homebuilding revenue increase substantially this year. In 21, net order units were up 26% and the average selling price of the company’s homes increased by about 5.4%. Since Lennar has higher average selling prices than many competitors, the low supply of homes should work in this company’s favor going forward. You have to like the way that this stock continues to rally even after such a huge run, which means that dips are likely buyable for the foreseeable future.
3. Lam Research Corporation
Some people say that semiconductor stocks are the heartbeat of the market, especially in the technology sector. These tiny chips are used in so many different devices and play a vital role in the overall economy, especially in today’s increasingly tech-dominated world. That’s why a company like Lam Research Corp (NASDAQ:) is a true market leader and why its shares should be scooped up on any market weakness.
Lam Research is the largest semiconductor equipment manufacturer of etch products, which are used to create integrated circuits. This etch process is used to manufacture every type of semiconductor device, and Lam has a wide economic moat thanks to its specialized technology. We know that there is a massive shortage of semiconductors at the moment, which means that this company’s products will be even more important than usual for as long as the shortage persists. There’s also the continued rollout of 5G that could lead to growth for Lam. The stock has broken out to new all-time highs this month and the company has a history of rewarding shareholders with buybacks and dividend increases, more great reasons why it’s a company to stick with for the long term.