Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Continuing the September Effect tradition, the month started with a market pullback. Over the week, the S&P 500 (SPX) is down 1.65%, while the Nasdaq Composite (IXIC) is down 3.38%. Nvidia is the greatest contributor to the market’s retraction, as NVDA shares lost 17% of value, erasing nearly $500 billion of its market cap from the $3.147 trillion on August 27th.

Overall, the market pullback is a repeat of early August. At the time, many investors took the opportunity to buy numerous dips. Case in point, it took NVDA just two weeks to rally to the pre-pullback value of July’s ~$122 range.

This time around, the Fed’s first rate cut is on the table for the September 17-18 FOMC meeting. At the Jackson Hole conference on August 23rd, Fed Chair Jerome Powell already hinted that “the time has come” for the end of the hiking cycle, presently at its highest 5.25% – 5.5% interest rate level in 23 years. 

Although this could signal a stock rally as the borrowing capital becomes cheaper, it could be overshadowed by recessionary signals and enact a further stock market dip. In that scenario, which stocks should investors watch for long term exposure on the road to recovery?

Costco (NASDAQ: COST)

The bullish case for Costco’s membership-based warehouse model has never been stronger. As other retail chains struggle with shoplifting, Costco erected a barrier against such losses. Although the membership model already acts as a powerful prevention measure, recently increased by $5 to $65 per year, the company’s warehouse layout also acts as a deterrent.

Moreover, this is augmented by Costco’s bulk offering of goods, making it further unlikely for shoplifters to even attempt the theft, let alone get away with it. Drawing from this model, Costco is able to keep the price of goods low, although at a limited range. 

As of Q2 2024, Costco’s net profit margin was 2.83% vs Walmart’s 2.34%. Although Costco has a lower gross margin of 12.50% compared to Walmart’s 24.63%, Costco’s reliance on consistent membership revenue more than offsets it. Similar to Netflix, this also means that Costco has to engage in occasional membership sharing crackdowns, as recently announced in August.

During an economic downturn, such a model is further to increase customer loyalty. This is already evident from Q2 figures when comparing Target’s modest 2.74% sales growth vs Costco’s significantly higher 9.07% YoY sales increase.

Presently priced at $878.12 per share, COST stock is getting close to its 52-week high of $918.93. Nasdaq’s forecasting data puts the average COST price target at $928.42 per share. COST shareholders can also rely on stock buybacks, having received $1.34 billion return in value during 2023 and 2022.

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Pedevco Corp. (NASDAQ: PED)

Year-to-date, oil prices have hit the lowest level at $72.75 per barrel. At the same time, global oil inventories are rising, suggesting that supply is meeting the demand. At this juncture, this indicates an opportunity for the proverbial dip for oil stocks.

One of the cheapest oil stocks is Pedevco, primarily operating in the Permian Basin to acquire and develop oil and natural gas production. As of Q2 2024 earnings filing in August, the company holds no debt, having generated $2.7 million net income, nearly double from $1.6 million in the year-ago quarter.

Year-to-date, PED stock is up 24% to current penny stock level of $0.97 per share. Nasdaq’s forecasting data placed the average PED stock target at $1.95, indicating potential 101% upside. Considering that it is only a matter of time before the economy reheats again, this is a solid opportunity for an oil company exposure with zero debt.

Advanced Micro Devices (NASDAQ: AMD)

The long-standing counterpart to Nvidia and Intel in GPU and CPU domains, AMD is now in a rare discount territory. At $142 per share, AMD stock is under the forecast bottom of $150, while significantly below the average price target of $190.25 per share.

Capitalizing on Intel’s mishap with 13th and 14th gen CPUs, AMD slashed the latest Ryzen 9000 Zen 5 CPUs by 12% within the first month of launch in August. After initial performance issues, it appears that Windows 11 optimization patch will not only solve the problem but significantly increase their performance. 

In the AI data center arena, AMD has made a bold move by acquiring ZT Systems for $4.9 billion. The purpose seems to be the recruiting of personnel to speed up AMD’s full-stack AI solutions which propelled Nvidia to such heights over the last two years. 

In the meantime, AMD is progressing with its rollout of AI-centric MI300X chips. The company recently improved their performance via ROCM 6.2 update, which is the equivalent to Nvidia’s CUDA (Compute Unified Device Architecture) framework. 

In Q2 earnings, AMD’s data center division tracked record 115% year-over-year growth to $2.8 billion, having generated 19% more income in total to $1.12 billion. As previously neglected high growth AI stock, compared to Nvidia, this appears to be the ideal AMD exposure entry at this point in time. 

Similar to Bitcoin price dips, are you looking forward to market pullbacks? Let us know in the comments below.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.