3 "Strong Buy" Stocks Bucking Last Week's Sell-Off

Sony (SNE), Dunkin Brands Group (DNKN), and NIO (NIO) are three stocks that are displaying relative strength while the market is undergoing a correction. Patrick Ryan gives his take on why investors should consider buying these stocks.

The stock market sell-off in anticipation of a contested election combined with a record-high number of coronavirus cases is certainly understandable. For investors, it also means an opportunity to add shares in high-quality companies whose businesses will thrive during this challenging period.

Some of the best investments are made during these corrections, as many will sell without regard to fundamentals. Our POWR Ratings system will allow you to identify companies that are exhibiting strong performance in poor market conditions.

Let’s take a look at three “Strong Buy” stocks that ascended during the market downturn last week: Sony (SNE), Dunkin Brands Group (DNKN), and NIO (NIO).

Sony (SNE)

SNE has a good chance of slowly rising or at least stagnating all the way up until its new PlayStation console is released this holiday season. Video game insiders insist the new PlayStation is vastly superior to the consoles offered by industry rivals Microsoft and Nintendo. Though SNE’s new console will be expensive and supply chain problems will limit the number available at launch, the bottom line is this revenue driver should help SNE move to new heights, possibly eclipsing $100 by the end of the first quarter in 2021. Add in the fact that people will inevitably spend that much more time indoors through the winter due to the pandemic's second wave and investors have all the more reason to buy SNE.

SNE is a POWR Ratings stud with "A" grades in the Peer Grade, Buy & Hold Grade, and Trade Grade components. SNE is ranked first of more than 20 stocks in the Entertainment - Media Producers category. The top analysts have set an average price target of $100 for SNE, indicating it will increase by nearly 17% before it is fairly priced. SNE has a fairly low forward P/E ratio of 19 because it is a tech stock.

Aside from video games, SNE is also a power player in the music business with its Sony Music division. This segment's profit is likely to spike 7%, hitting $1.4 billion. Add in the fact that there is stronger demand for Sony's financial services and investors have all the more reason to be bullish on the stock.

Dunkin Brands Group (DNKN)

DNKN closed a considerable number of its locations amidst the pandemic yet its stock has bounced back with a vengeance. News recently broke that the owner of Arby's, Inspire Brands, has purchased DNKN for more than $11 billion. This is fantastic news for DNKN investors.

Inspire also owns Buffalo Wild Wings and Jimmy John's Gourmet Sandwiches. However, the acquisition of DNKN is the most expensive buyout with the deal coming in at more than 20 times the company's '21 estimated EV to EBITDA ratio. It is particularly interesting to note DNKN's same-store sale growth in the third-quarter has returned to the pre-pandemic level. Furthermore, comparable sales are up nearly 1% from the year prior.

DNKN has flawless POWR Ratings with "A" grades in the Peer Grade, Industry Rank, Buy & Hold, and Trade Grade components. All in all, DNKN is ranked 2nd of nearly 50 publicly traded companies in the Restaurants category.

NIO (NIO)

NIO, a maker of electric vehicles in China, just keeps climbing higher and higher. Through NIO does not make its own cars, it has no trouble selling them at competitive prices. NIO pays a fee to JAC Motors for each car made and subsequently sold.

NIO sells automobiles through apps and on the web rather than using a traditional business model centered on a dealership network. NIO has "A" grades in the Buy & Hold, Trade, Peer, and Industry Rank Grade POWR Rating components. Furthermore, NIO is ranked in the top five of 115 China stocks.

News recently broke that NIO's sales doubled last month, helping the stock climb higher even as the overall market declined. Scroll through the NIO's news feed and you will find nearly every story is positive. The sky is the limit for NIO. This just might be China's version of Tesla.

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NIO shares were trading at $32.50 per share on Monday afternoon, up $1.92 (+6.28%). Year-to-date, NIO has gained 708.46%, versus a 3.91% rise in the benchmark S&P 500 index during the same period.



About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.

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