It has happened again. Fears over Europe have taken down global markets, with the Dow Jones Industrial Average down over 400 points in the last week or so. We've seen this story before. Europe takes us down for a week or so, then we rally back. With stocks taking a small breather here, there are some great stocks to enter at current levels. So here are my five top buys on this most recent dip.
Philip Morris (PM): I recently wrote about the cigarette name, stating that you should wait for a pullback, and it is here. After the company took down earnings expectations for the year, a few analysts cited valuation concerns when the name was near or above $90. I agreed with that stance, and gave my recommendation to enter the name between $84.64 and $87.29. We are now at $86.15. This name sports a 3.58% dividend yield currently, and the company is expected to raise the dividend nicely later this year. The company is also buying back $1.5 billion of its own stock each quarter this year. Pullbacks in this name have been very short lived, and I have said that PM goes to $100. This latest pullback of more than $5 has provided a great entry point into the stock. I would advise investors to purchase some at these levels, but also enter some limit orders to pick up some additional shares if we go lower.
Baidu (BIDU): Baidu finally got back over $150 in April, but has lost $30 since then. Global worries have knocked down names like this, and Baidu has been dragged down like other Chinese internet names. Baidu's earnings report wasn't great, however the stock only lost $1 the day after earnings. Yes, guidance was a little light, but we've see that with a lot of names. Baidu is still projected to grow revenues by nearly 58% this year and 42% next year, with earnings per share growth to be about the same. Baidu is my top pick in the Chinese space, and I would even prefer the Chinese search giant over Google (GOOG). With this latest pullback, Baidu sits at just $122, with the average analyst price target above $184. That implies 50% upside.
McDonald's (MCD): Shares of the fast food giant have hit a 6-month low as monthly same store sales in the U.S. missed estimates recently. Concerns over Europe haven't helped either. When this name traded for over $100, I recommended an entry price below $98. At that time, several people told me I was crazy, that McDonald's would not drop below $98 anytime soon. Well, it has, as we are now below $92. The recent decline has pushed the current yield on this name to more than 3%. There is still plenty of growth ahead, with revenues forecast to rise by more than 5% this year and next. Earnings per share are expected to rise even more, in percentage terms. Shares of this company are at their lowest levels since November. I think that provides a very good buying opportunity, and your current yield is a bit higher at the moment.
Lululemon (LULU): The yoga and apparel retailer has pulled back nearly 10% off its 52-week high. Part of the reason was due to the collapse in Fossil (FOSL) shares over weakness in Europe. However, Lululemon remains a top tier retailer, and is showing explosive growth. Revenues are forecast to rise by 35% this year (ending in January 2013) and 24% in the following year. The company has continued to beat estimates, and has products that are high in demand currently. Past concerns over high inventory levels turned out to be false, and actually became a positive when the company's revenues soared. This company knows what consumers want, and knows how to sell it to them. There are a few analysts that see this name heading towards $100, and I agree. With the recent pullback from $81 to below $74, you should enter here. You'll be happy going forward.
Intuitive Surgical (ISRG): One of the hidden gems on the street today has pulled back from its $595 high to under $560. This is the company behind the da Vinci surgical system, or surgical robots. The company boasts sky high margins and is buying back stock currently. The company is growing at a double digit pace, and consistently blows out analyst estimates. If you are looking for growth, this company provides it, and it is considered a healthcare name that provides some nice diversification to any portfolio. I've stated in the past that I think this name goes to $700 in 2013, which means there is plenty of upside left in the name. I would advise buying a third of your position at these levels, and setting some limit orders at lower prices. If the name rallies, you won't have a full position, but you'll make some money. If it declines a little from here, you'll be able to build a larger position with a lower cost basis.