Buy on the dip opportunity ahead?--if you think a 3% drop is a dip

12/05/2013 4:06 pm EST


Jim Jubak

Founder and Editor,

It’s been 547 trading days—since August 2011—since U.S. stocks have suffered a 10% correction.

That’s a good thing if you’re all in but not so good if you’ve got money on the sidelines or cash flowing into your portfolio (from say your retirement contributions) that you’d like to invest on the dip.

No wonder that with the Standard & Poor’s 500 stock index down a whopping 1.1% from November 27 to noon (New York time) on December 5, I’m thinking about a buy on the dip opportunity of say a 3% decline or maybe a little more

A 10% drop is, I think pretty unlikely in the near term—say in December or January—because there is still money on the sidelines ready to buy the dip. And that, of course, limits the size of any dip.

3% though? Maybe a little more?

That seems possible given the market’s obvious nerves over the will they/won’t they meeting of the Federal Reserve’s Open Market Committee on December 18. That day could, although I think the odds are against it (even after today’s GDP number), bring a decision from the Fed to begin to taper off the central bank’s monthly $85 billion in asset purchases. That worry—witness the weakness in the market yesterday on a report of stronger than expected job growth from the ADP survey—was enough to take the market down from the open until about 1:30 p.m. New York time.

The market’s rally from 1:30 p.m. almost until the closing bell on December 4 is also an indication of the strength of buy on the dip sentiment.

I wouldn’t go hog wild with joy at a 3% drip, but there are a few stocks that I’ve been waiting to buy if they would just pull back a bit.

Some individual stocks are already close to or slightly over that 3% dip benchmark. Cummins (CMI), for example, is down 2.9% from December 2 through the December 4 close. Flowserve (FLS) is down 3.4% from November 25 through December 4.

And a few attractive names are down even more. Schlumberger (SLB), for instance, is down 7.1% from November 11 through December 4 and Middleby (MIDD) is down 8.8% from October 25 through December 4.

Cummins, Flowserve, Middleby, and Schlumberger are all members of my Jubak Picks 50 long-term portfolio .

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Cummins as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund’s portfolio at
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