Many highly successful stock pickers, including Warren Buffett, often buy stocks on weakness. That’s largely because companies that are great or are on their way to greatness often sink for reasons that are not at all justified.
For example, on Feb. 21, Super Micro Computer (NASDAQ:SMCI) dropped to as low as $817.08 per share. Many investors wrung their hands about the stock’s valuation, even though it was not expensive, along with the firm’s decision to sell more shares of its stock. Of course, the latter decision ultimately did not greatly affect the company’s fundamentals. Anyone who bought the stock for just above $700 and sold it near its high of $1,033 on Mar. 28, a little over a month later, would have generated a profit of nearly 50% in a little over a month.
So Buffett’s belief that investors should “be fearful when others are greedy and… be greedy only when others are fearful” does work. For those who want to profit from that philosophy, here are three stocks to buy on dips.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH), which sells inverters used in solar energy projects, tumbled over 10% on Apr. 5 compared to its highs on the previous day. The catalyst for the downturn was reportedly the decision by Chief Commercial Officer David Ranhoff leaving the firm “for personal reasons” effective Jun. 30.
But sometimes executives really do leave firms for personal reasons, and this may be the case for Ranhoof. Moreover, it’s unlikely that Enphase will badly be hurt by the departure of its chief commercial officer. The company probably has many highly capable sales managers who can adequately fill his shoes.
And importantly, Nextracker (NASDAQ:NXT) CEO Dan Shugar said in February that “solar is unstoppable” and “the intrinsic economics of utility scale are phenomenal both in the U.S. and overseas. It has never been as favorable as it is.”
Enphase is reeling from the weakness of residential solar in California due to regulatory changes in the state. Also, excess inventories in Europe weigh on the stock. Those issues, though, are expected to be temporary. They should be dwarfed over the longer term by huge increases in the demand for solar energy by utilities.
These increases will be driven, as I’ve noted in the past, by significant gains in electricity demand. By the end of this year, ENPH stock should be far above its current levels as a result of the latter trend. Consequently, ENPH is one of the best stocks to buy on dips.
Intel (INTC)
The market has penalized Intel (NASDAQ:INTC) stock after the firm announced on Apr. 2 after the market closed that its manufacturing unit’s operational losses increased to $7 billion last year from $5.2 billion in 2022. Further, the unit’s revenue declined 31% to $18.9 billion. In the wake of the admittedly discouraging news, INTC stock retreated about 15% from recent highs. But CEO Pat Gelsinger explained the firm was remedying bad decisions it had made previously that weighed down the manufacturing business. What’s more, Intel expects the unit’s operating losses to peak this year. Also noteworthy is that it predicted the unit will break even on an operating basis in 2027.
But the manufacturing unit’s backlog now exceeds $15 billion, and it secured a sizeable deal from Microsoft (NASDAQ:MSFT). There are also indications that INTC may soon obtain a meaningful commitment from Nvidia (NASDAQ:NVDA).
As a result, other tech firms impressed by Intel’s ability to win deals from two of the biggest names in the sector may sign contracts as well. I predict within the next 12 months the Street will start to be enamored with Intel again as the manufacturing unit’s backlog grows.
Further, as I’ve previously noted, reviews of the company’s powerful artificial intelligence Gaudi chips have been quite favorable. The chips’ backlog reached over $2 billion by the end of last year. What’s more, the backlog is growing quite rapidly. Intel is expected to launch a greatly improved version of the chip later this year.
American Superconductor (AMSC)
American Superconductor (NASDAQ:AMSC) sells products used to regulate the flow of electricity. It serves multiple industries whose use of electricity or whose revenues are rapidly increasing.
Specifically, AMSC has many customers that operate semiconductor plants, and the number of such factories is surging. The sector’s use of electricity is booming as AI proliferates rapidly. Similarly, the company has many customers in the mining and materials sector. That space is growing rapidly as metals prices jump and demand for their use in renewable energy products and electric vehicles rises.
The shares are down 13% from their March high of $15 and are changing hands at a forward price-sales ratio of three times.
On the date of publication, Larry Ramer held long positions in SMCI, INTC, and AMSC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
