Amid the broad market rally, several stocks have lagged, missing out on the notable ascents enjoyed by many shares and exchange-traded funds (ETFs). Yet, this divergence presents a unique opportunity to go bargain hunting on the Street. Some stocks may lag behind during a rally, only to surge ahead when the broader market cools off. It’s these hidden gems that we aim to uncover today.
Sunstone Hotel Investors (SHO)
We start our discussion about stocks to buy on the dip with Sunstone Hotel Investors (NYSE:SHO), a lodging real estate investment trust (REIT). Sunstone’s portfolio includes interests in 15 hotels with over 7,300 rooms. These properties are predominantly operated under renowned brands such as Marriott, Hilton and Hyatt. While not necessarily a slam dunk, SHO offers a potential combination of capital appreciation and a healthy dividend yield, making it a contender for long-term portfolios.
Currently, Sunstone has a market capitalization of approximately $2.1 billion. In early May, the hospitality REIT released first quarter 2024 results that raised eyebrows. Net income was $13.0 million, falling from $21.1 million in the first quarter of 2023. Similarly, Revenue per Available Room declined 5.1% year-over-year (YoY) and came in at $223.06. Finally, funds from operations (FFO) declined 14.3% to 18 cents.
Yet, Sunstone’s management expects significant earnings growth in 2025, with a forecast for double-digit EBITDA growth. This optimistic outlook is supported by a strong balance sheet with over $401 million in cash and equivalents and a low leverage ratio.
Earlier in April, Sunstone acquired the 630-room Hyatt Regency San Antonio Riverwalk, strategically located in Texas. The REIT has also been making significant renovations at several other properties. These investments are part of a broader strategy to drive growth through internal investments and potential future hotel acquisitions.
So far in the year, SHO stock has lost close to 3% but offers a dividend yield of 3.5%. The shares seem fairly priced, with a price-to-book value of 1.13. Meanwhile, the 12-month median price forecast for SHO shares stands at $11.00, with an upside potential of 5.7% from current price levels. Despite some fluctuations in financial metrics and SHO stock performance, the REIT’s strategic investments and strong financial base position it well for future growth.
Tetra Technologies (TTI)
Next up in our list of stocks to buy on the dip is the Texas-based TETRA Technologies (NYSE:TTI), a small-cap player in the energy equipment and services industry. TETRA operates through two main segments: Completion Fluids & Products and Water & Flowback Services. These segments focus on drilling, completion, water management and flowback services.
At present, TETRA Technologies has a market cap of slightly over $552 million. According to recent earnings results, the energy company earned record net revenues of $1.05 billion, up 9% YoY. Similarly, earnings per share (EPS) increased notably by 34% to $1.42. Investors noted that the Completion Fluids & Products segment performed notably well, driven by increased offshore deepwater operations. However, the Water & Flowback Services segment faced challenges, with lower activity levels and higher costs.
Looking ahead, TETRA’s management was optimistic and raised its guidance for the full fiscal year 2024, with a forecasted EPS growth of 22%. Meanwhile, the company is also focusing on key strategic initiatives like water-beneficial reuse and lithium projects, which are expected to drive long-term shareholder value.
Since January, TTI stock is down about 7%, and changing hands at 15.2 times forward earnings and 0.9 times sales. Wall Street remains optimistic, with a price upside potential of over 78%. We believe TETRA Technologies stock is backed by relatively strong fundamentals, strategic growth initiatives and a competitive stance in the energy sector.
Invesco Solar ETF (TAN)
Finally, the third asset to buy on the dip is an exchange-traded fund, namely the Invesco Solar ETF (NYSEARCA:TAN). It gives investors the possibility to tap into the solar industry and ongoing transition to cleaner energy sources. The segment has seen exponential growth over the past decade due to declining costs of solar panels, increased efficiency and supportive government policies. Yet, challenges remain, including supply chain disruptions, policy uncertainties and competition from other renewable energy sources.
Over half of the companies in TAN come from the U.S., followed by China, Germany, Israel and Spain. Among the leading names in the ETF are First Solar (NASDAQ:FSLR), Enphase Energy (NASDAQ:ENPH), Nextracker (NASDAQ:NXT) and Hannon Armstrong Sustainable Infrastructure Capital (NYSE:HASI).
So far in 2024, TAN has declined about 20%, while the fall in a year has been 40%. These figures highlight the concerns faced by the solar industry over the past year. However, they also underscore the potential for rebound and growth as renewable energy companies address these issues.
Currently, the fund’s forward price-to-earnings ratio is 21x, and its P/B ratio is 1.4x. Finally, one of the key stats to note about TAN, the final name on our list of “stocks to buy on the dip” is the expense ratio for the fund. At 0.67%, it is slightly higher than the average ETF on Wall Street.
On the date of publication, Tezcan Gecgil did not hold (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.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.