🚨This Dip Won't Last (Buying These 6 Stocks Now)
Summary
Nolan states that the current market environment, despite the S&P 500 being near record highs, hides significant undervaluation in "iconic names" that have been hit by temporary fears. He explains that recent market volatility, including a sharp drop followed by a rebound driven by strong tech earnings, has exposed a separation between companies demonstrating real results from AI spending and those merely spending. Nolan emphasizes that the best opportunities arise when fear is highest, urging investors to identify fundamentally strong businesses experiencing temporary dips rather than permanent issues. He outlines a strategy for finding undervalued stocks using tools like Investing Pro and presents six specific stock recommendations, categorized by risk level for a tiered investment approach.
Nolan's recommendations include:
Nolan concludes by providing three rules for buying the dip: ensure it's a true discount (great business, temporary fear) and not a broken business; buy in pieces through dollar-cost averaging; and size positions according to risk, with riskier names receiving smaller allocations.
Mentioned Stocks
Reasoning: Nolan sees Micron as a high-risk, high-reward stock, currently in the mid-$800s, down a third from its $1,255 June high. Despite reporting record semiconductor earnings with 346% YoY revenue growth and its High Bandwidth Memory (essential for AI) sold out through 2027, the stock fell due to fears of Chinese competition (CXMT IPO) and cyclical memory oversupply. Nolan counters this by highlighting pricing power, with tech giants like Amazon and Apple complaining about high memory costs. It trades at 6x next year's earnings, with analysts targeting around $1,500. Nolan warns about its cyclical nature and the China threat, advising careful sizing due to its high risk.
Reasoning: Nolan sees Amazon as a world-class company that was undervalued due to spending fears regarding its $200 billion capital projects. Recent strong earnings disproved these fears, showing a 20% revenue jump, 36.7% growth in AWS, and triple-digit growth in AI/chip businesses. Even after a 13% post-earnings surge, Nolan believes it's still cheap at 27 times forward earnings (below its historical average). Morningstar raised its fair value to $300, confirming its wide moat and undervaluation.
Reasoning: Nolan identifies SoFi as the highest-discount and highest-risk stock, trading around $17, down 50% from its all-time high. He personally bought more shares during its recent dip. He argues that SoFi's business is robust, with record revenue ($1.2 billion, up 43% YoY), strong member growth, increasing loan volume, and genuine profitability, no longer a "pre-profit story stock." The stock's decline is attributed to high expectations and not raising profit outlook alongside revenue. Morningstar raised its fair value to $17.50, and analysts average a $19.87 target. Nolan explicitly warns of high volatility, analyst "hold" ratings, reliance on personal loans, and a shrinking tech platform, recommending it only for a small, high-risk portion of a portfolio.
Reasoning: Nolan has been dollar-cost averaging into Alphabet monthly for two years and likes it even more than Amazon. He believes the market is wrong about its current valuation (~$362), which is down 14% from its May high of $409, seeing it as still undervalued. Despite a monster quarter with 24% revenue growth, the stock fell due to increased spending plans ($205 billion). Nolan highlights that this spending fuels significant growth in Google Cloud (82% growth, $514 billion backlog), the Gemini app, and other ventures like Waymo ($126 billion valuation). Morningstar rates it four stars with a $433 fair value, and analysts average a $428 target.
Reasoning: Nolan sees Disney as significantly undervalued at around $96, down 52% from its 2021 peak of $200. He attributes the dip to real fears like profit drops in entertainment and sports and $41 billion in debt. However, he emphasizes that the most recent quarter showed stabilization with total segment profit up 4%, which the market ignored. Nolan views Disney as cheap at 13 times forward earnings, given its valuable character library and profitable theme parks. Analysts consensus is a strong buy with a $127 average target, and Morningstar has a $125 fair value.
Reasoning: Nolan suggests Hershey's is undervalued at around $176, down 36% from its $277 high, primarily due to record cocoa prices crushing margins. Despite beating earnings, revenue, and raising full-year guidance, the stock fell, indicating fear-driven pricing. Nolan points out that management expects cocoa costs to trend downwards in 2027, reversing the main headwind. The stock also offers a 3.3% dividend yield, and analysts project a 16% upside from current prices.