The #1 Buy the Dip Stock You’re Missing

Every now and again, a stock that’s been on a run experiences a pullback in tandem with sector-level selling. The end result is usually quite a formidable dip; and if the fundamentals and growth trajectory are intact, then it’s also a buying opportunity.

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That’s exactly what happened with the company I’m talking about today … and I think it fits the situation that I’ve described perfectly. 

In this case, the run is a 110% gain in the past 365 days. The dip doesn’t neatly fit into the 1-week or even 1-month view, but since the end of June, shares have dipped roughly 13%.

I’m going to lay out the fundamental case and why I think it’s worth watching. But first, the ticker.

It’s Benchmark Electronics (BHE).

First, I’ll lay out the fundamental case. Our in-house quant system, Zen Ratings, evaluates 4,600 stocks on a daily basis through the lens of 115 factors. Those insights are boiled down into a single metric — a stock’s Zen Rating. Only the tickers that rank in the top 5% on overall fundamentals are given a Zen Rating of A, and stocks of that caliber have provided an average annual return of 28.5%.

BHE is in that basket of stocks. In fact, it ranks in the top 3% of everything we track. But to get a better overview of what its exact strengths are, we have to look at the 7 Component Grade ratings that make up each Zen Rating.

The overall fundamental profile is quite balanced. When it comes to Sentiment, Benchmark Electronics shares rank in the top 20%, which indicates a significant degree of smart money accumulation. Financials are another strong point, landing in the top 16%, so we’ve also got a strong balance sheet on our hands.

Then, we have our Safety rating, which is a measure of how stable revenue inflows are, how volatile the stock is relative to peers, and how predictable earnings have historically been. Top 9% in that category. And the track record for strong execution is quite strong here — BHE has beaten EPS estimates for 12 quarters in a row. That’s 3 years of outperformance.

With all of that said, it’s the Growth rating that really caught my eye here. Benchmark is in the top 7% of everything we track in this regard. And once you look at the earnings growth forecast, it’s easy to see why. Earnings are expected to grow by 193.69%, more than 4 times as fast as the industry average.

Last but not least, we also have a placement in the top 3% of stocks for Momentum, so despite the dip, BHE has not lagged behind industry competitors.

There’s one last metric I want to draw your attention to. Benchmark Electronics isn’t a deep value pick — it gets a C rating for Value, so it’s in the middle of the pack in that category. But the price-to-earnings growth (PEG) ratio stands at 0.57x. 

Relative to growth prospects, the stock is significantly undervalued. The only question is whether or not the business can keep delivering, but with that 12-quarter beat streak in tow, I don’t see a particular reason to worry.

There are also 2 positive catalysts to keep in mind with BHE. In June, the stock got added to several Russell growth and small-cap indices, so it’s likely that passive-fund demand will improve liquidity and increase institutional ownership.

On top of that, the company recently expanded its partnership with Ouster on the new REV8 line of digital lidar sensors. Benchmark has the capacity to produce about 100,000 of these units each year, and the product has a 10-year lifecycle, so there’s a real ramp there.

Long story short, everything looks great here — and that 13% dip is just the cherry on top.

—> Click here to research BHE

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