When it comes to investing, you've probably heard the saying "Buy low, sell high." And in theory, it's an easy plan to follow.
However, in practice, it's much harder. Buying a stock that has increased in value month after month can feel easy. But buying a stock that's fallen in value can feel risky -- even painful. Yet, that's often what you must do to "buy low and sell high."
With that in mind, let's look at three stocks worth buying on the dip. Each one has solid fundamentals but is down more than 40% this year.
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Advanced Micro Devices
After years of rockstar-like performance, Advanced Micro Devices (AMD +0.45%) finally came crashing back to Earth in 2022. Shares are down 52% year to date as slumping PC sales have weighed on results.
During the first week of October, AMD released partial third-quarter results that were significantly below its earlier guidance, delivering another blow to its stock price.
NASDAQ: AMD
Key Data Points
However, by getting the bad news out of the way, AMD Chief Executive Officer Lisa Su set the company up for success when it released full third-quarter results on Nov. 1, 2022. Revenue and earnings per share both missed estimates, but only slightly.
Meanwhile, AMD's non-PC segments (Data Center, Gaming, and Embedded) all delivered solid revenue in line with analyst estimates.
The bottom line is this: Semiconductors are everywhere, and they're integral to our current (and future) economy. AMD is one of the best-run semiconductor companies in the world, and its non-PC segments continue to fire on all cylinders. For those reasons, AMD is worth buying on the dip.
Airbnb
The second stock I want to buy on the dip right now is Airbnb (ABNB 1.45%). The company operates an online rental marketplace that connects hosts (landlords) and guests (renters).
After enduring a pandemic-caused slowdown in 2020 and 2021, Airbnb's revenue bounced back in 2022 as pent-up travel demand drove a surge in bookings. In fact, the company reported its highest-ever quarterly revenue figure of $2.9 billion for the three months ending on Sept. 29, 2022.
Yet, Wall Street was unimpressed. Shares fell following the earnings release, presumably due to lackluster fourth-quarter revenue guidance. But it doesn't require much work to see that Airbnb's financial metrics look fantastic.
NASDAQ: ABNB
Key Data Points
Net income swelled 46% year over year to a quarterly record high of $1.2 billion, and free cash flow increased to $960 million. Airbnb saw close to 100 million nights and experiences booked -- up 25% on a year-over-year basis.
Nevertheless, Airbnb shares are down 38% year to date. However, I still believe in the company's business model and management. High inflation and rising interest rates might hold Airbnb back in the short term, but it's a stock worth owning in the long run.
Tesla
The final solid stock I want to buy on the dip is Tesla (TSLA 1.85%). Like my first two picks, shares of Tesla have been under pressure this year; its stock price is down 45% year to date. Yet, like AMD and Airbnb, there's been no deterioration in Tesla's fundamentals. In fact, the company has just reported some of the best quarterly results in its history.
Revenue (for the three months ending Sept. 29, 2022) was $21.5 billion. Net income was $3.3 billion, or nearly double its year-ago figure. Overall gross margins held steady at around 25%, showing that Tesla is doing a fine job navigating volatile price swings in parts and materials.
NASDAQ: TSLA
Key Data Points
What's more, management painted a rosy picture of the future. CEO Elon Musk foreshadowed a prospective stock buyback of between $5 billion and $10 billion next year, along with a vision to "far exceed Apple's current market cap." Surpassing Apple's $2.2 trillion market cap would mean more than tripling Tesla's current share price, but that goal isn't unrealistic if the company can continue to grow at around 50% year over year.
Yet, there is a concern that has weighed on many Tesla investors this year: Musk is selling shares of Tesla to help pay for his $44 billion purchase of the social media platform Twitter. Musk has sold more than $19 billion worth of Tesla shares this year to fund his purchase of the social media company. Those sales have undoubtedly put downward pressure on the stock. However, they may present an excellent opportunity for prospective investors.
In the bigger picture, Tesla remains an automotive juggernaut. If the company can successfully expand into trucks and semis, too -- look out. Investors would be smart to load up on Tesla now, as broader economic conditions and Musk's stock sales hold it back.
