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5 Incredible ETFs & Stocks to Buy On the Dips

Wall Street has been on the second-longest bull run in U.S. history with the major bourses hitting new milestones. Notably, the Dow Jones industrial Average hit another landmark 23,000 last week. Resumption of Trump trade, upbeat economic data, and deluge of solid earnings reports are instilling optimism in the world’s largest economy (read: Dow ETFs Soar as the Index Hits 23,000).

Manufacturing activity, as measured by the Institute for Supply Management, reached a 13-year high in September while non-manufacturing activity or the service sector expanded to the highest level since August 2005. Additionally, auto sales strongly rebounded in September posting the best month of the year, following the eighth consecutive month of decline. Consumer confidence soared to highest level since 2004 in early October, per the preliminary University of Michigan reading.

Further, the Senate’s passage of the $1.4 trillion budget resolution has paved the way for tax cuts later this year or early next year. The reform will likely create an economic surge, boosting job growth in manufacturing and other sectors. The step toward the tax overhaul sparked a strong rally in the stocks lately and is a key catalyst to the likely future market boom (read: 5 Biggest ETF Winners of Trump Trade Resurgence).

While the rally is broad-based, there is still some bargain hunting for investors. Additionally, any dip in the stock market could be an attractive entry point. This is especially true for now as the stock market pulled back slightly on Wednesday and saw its worst day in two months. Notably, the Dow Jones witnessed the biggest one-day fall since Sep 5.

As a result, we have highlighted five ETFs and five stocks that have been selling at a bargain price. Investors could definitely look at these products for outperformance in the coming weeks.

How to Find Bargain ETFs?

Using our database, first we selected the ETFs with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is because these ranks suggest strengthening fundamentals and superior weighting methodologies that could allow them to lead higher than their cousins in a booming market. Then we narrowed down the list to funds having a lower P/E ratio than 18.67 for the broad market fund SPY, expense ratio of less than 0.30% and dividend yield of at least 2%.

Here are the five ETFs that are currently undervalued and could generate solid returns in a rising stock market.

iShares Edge MSCI USA Value Factor ETF VLUE

This fund provides exposure to large and mid-cap stocks with lower valuations based on fundamentals. It follows the MSCI USA Enhanced Value Index.

Zacks ETF Rank: #3
P/E Ratio: 14.80
Expense Ratio: 0.15%
Dividend Yield: 2.11%

SPDR Russell 1000 Yield Focus ETF ONEY

This fund seeks to track the Russell 1000 Yield Focused Factor Index, which measures the performance of a large-cap securities demonstrating a combination of core factors (high value, high quality, and low size characteristics), with a focus factor comprising high yield characteristics (read: 5 Trending Dividend-Yield Weighted ETFs).

Zacks ETF Rank: #3
P/E Ratio: 16.51
Expense Ratio: 0.20%
Dividend Yield: 3.00%

Legg Mason Low Volatility High Dividend ETF LVHD

This fund provides exposure to U.S. companies with a relatively high yield, low price and earnings volatility.

Zacks ETF Rank: #3
P/E Ratio: 16.75
Expense Ratio: 0.27%
Dividend Yield: 3.26%

SPDR S&P 500 Value ETF SPYV

This ETF offers pure exposure to the large-cap value segment of the U.S. equity market by tracking the S&P 500 Pure Value Index.

Zacks ETF Rank: #3
P/E Ratio: 16.85
Expense Ratio: 0.04%
Dividend Yield: 2.27%

iShares Morningstar Large-Cap Value ETF JKF

This product offers exposure to large U.S. companies that are thought to be undervalued by the market relative to comparable companies. It follows the Morningstar Large Value Index.

Zacks ETF Rank: #3
P/E Ratio: 17.74
Expense Ratio: 0.25%
Dividend Yield: 2.44%

How to Find Bargain Stocks?

For this, we have used our Zacks stock screener and selected stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Style Score of B or better. This is because a top rank suggests rising earnings estimates, which indicate an optimistic view on earnings by analysts and hence higher chances of outperformance. Then we looked for stocks having a low P/E than the S&P 500 index (25.50), double-digit estimated earnings growth rate for this year and dividend yield of at least 2%.

Finally, we arrived at the five stocks that are cheap and have the potential to deliver higher returns.

OM Asset Management PLC OMAM

This is a multi-boutique asset management company based in Massachusetts.

Zacks Stock Rank: #2
VGM Style Score: A
P/E Ratio: 10.01
This Year Fiscal Earnings Growth Rate: 28.93%
Dividend Yield: 2.31%

Noble Midstream Partners LP NBLX

This Houston-based company is engaged in crude oil and natural gas exploration and production.

Zacks Stock Rank: #1
VGM Style Score: A
P/E Ratio: 13.34
This Year Fiscal Earnings Growth Rate: 317.98%
Dividend Yield: 3.59%

Intel Corporation INTC

This California-based company is one of the world's largest semiconductor chipmakers (read: Semiconductor ETFs Touch New Highs Ahead of Q3 Earnings).

Zacks Stock Rank: #2
VGM Style Score: A
P/E Ratio: 13.60
This Year Fiscal Earnings Growth Rate: 10.66%
Dividend Yield: 2.66%

Best Buy Co. Inc. BBY

This is a Minnesota-based retailer of technology products, services, and solutions in the United States, Canada and Mexico.

Zacks Stock Rank: #2
VGM Style Score: A
P/E Ratio: 13.99
This Year Fiscal Earnings Growth Rate: 13.76%
Dividend Yield: 2.40%

Commercial Metals Company CMC

This Texas-based company manufactures, recycles and markets steel and metal products, and related materials and services in the United States and internationally.

Zacks Stock Rank: #2
VGM Style Score: A
P/E Ratio: 14.11
This Year Fiscal Earnings Growth Rate: 80.41%
Dividend Yield: 2.20%

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bottom Line

The above-mentioned products are compelling options for investors as these appear undervalued than the overall market at the current levels.

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OM Asset Management PLC (OMAM): Free Stock Analysis Report
 
SPDR-SP 500 TR (SPY): ETF Research Reports
 
SPDR-SP5 VL (SPYV): ETF Research Reports
 
LM-LO VOL HIDIV (LVHD): ETF Research Reports
 
Noble Midstream Partners LP (NBLX): Free Stock Analysis Report
 
Best Buy Co., Inc. (BBY): Free Stock Analysis Report
 
Commercial Metals Company (CMC): Free Stock Analysis Report
 
Intel Corporation (INTC): Free Stock Analysis Report
 
ISHARS-MO LC VL (JKF): ETF Research Reports
 
ISHARS-MS US VF (VLUE): ETF Research Reports
 
SPDR-R1000 YF (ONEY): ETF Research Reports
 
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