Buying the dip is an effective way to lower your cost basis for long-term positions. This strategy helps people realize a great upside when stocks recover, but not every stock is a buy the dip candidate.
Some dips keep on dipping, and stocks that look like bargains are like that for a reason. However, other stocks offer promising prospects for investors with lengthy time horizons.
It’s amazing to think that the Magnificent Seven stocks do the bulk of the heavy lifting for the Standards and Practices (S&P) 500 and Nasdaq 100. In fact, an equal weighted S&P 500 index would have only generated a 0.1% year-to-date return. That’s a lot different from the 12.4% year-to-date return the index fund generated as of Oct. 5, 2023.
Rather than make it easy for myself and stick with FAANG stocks for this article, I decided to look deeper within the Nasdaq 100 to find other stocks that make up the list, and it’s easy to see why the Magnificent Seven end up doing most of the work.
However, there are three stocks in the Nasdaq 100 worth a closer look, even though they aren’t a part of the Magnificent Seven.
Even though the Argentinian e-commerce and fintech company isn’t part of the Magnificent Seven, it has certainly played the part. MercadoLibre (NASDAQ:MELI) shares are up by 41% year-to-date and have gained 296% throughout the past five years.
The company has healthy year-over-year revenue and earnings growth and is gaining market share. MELI shares trade at a 40 forward P/E ratio and have a decent 0.97 PEG ratio. Shares reached an all-time high of $1,984.34 on Jan. 20, 2021. Shares can reclaim the all-time high within a few years if the company continues to deliver exceptional financials.
MercadoLibre exceeded expectations for revenue and EPS in the previous quarter. Net income more than doubled year-over-year, and revenue jumped by 31.5% year-over-year. The company releases its next earnings report on Nov. 1. That date will give investors more clarity on the business model and what the future holds.
Most stocks with MercadoLibre’s growth numbers and potential end up with high net losses. MercadoLibre combines high revenue growth with healthy profit margins to offer an enticing long-term investment opportunity.
Workday (NASDAQ:WDAY) is a financial management software that also has products for human capital management and student information systems. Shares are up by 25% year-to-date and have posted a 75% gain throughout the past five years.
Year-over-year revenue growth has decelerated in recent quarters, but the company still generated a 16.3% year-over-year growth rate in the second quarter of Fiscal 2024. While the revenue growth was impressive, the bigger news is net income.
Workday became profitable in the previous quarter, and this quarter demonstrated rapidly expanding profit margins. The company reported $78.7 million in net income which is a dramatic jump from the $136,000 net income from the previous quarter.
Expanding profit margins can make the stock’s valuation look more enticing in the future and support a higher stock price. Shares briefly touched $300 apiece on Nov. 17, 2021 and haven’t been at that level since. Workday is a good non-Magnificent Seven stock to keep on your watchlist.
Crowdstrike (NASDAQ:CRWD) is a cybersecurity company that offers critical software for businesses. The company’s software protects cloud workloads, data and other important digital resources. The company has strong financials, and recent profitability makes shares look more enticing.
In the second quarter of Fiscal 2024, Crowdstrike reported 37% year-over-year revenue growth. The company generates more than $2.93 billion as annual recurring revenue which provides a good foundation. Annual recurring revenue also increased by 37% year-over-year.
Crowdstrike also generated $8.5 million in GAAP net income. The company projects $179.8 million – $181.8 million in non-GAAP income. If the company continues to expand profit margins, it can support a higher stock prices.
Crowdstrike investors have had plenty to be happy about even before the switch to profitability. CRWD stock has gained 73% year-to-date and is up by 178% over the past five years. Those types of returns can compete with the Magnificent Seven and have helped Nasdaq 100 investors.
On the date of publication, Marc Guberti 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.