Image source: Getty Images.

It's hard to believe the rollercoaster that the stock market has been on for the first seven months of 2016. It set a new record with the worst two-week start to a year ever; then investors witnessed the most voracious intraquarter rally in U.S. stock markets since 1933, with the broad-based S&P 500 ending the first quarter ever so slightly higher.

Following Brexit, it appeared stocks could once again be headed lower -- but it's amazing the difference a few weeks makes. As we enter the heart of earnings season, both the Dow Jones Industrial Average and S&P 500 have logged new all-time highs.

Four top stocks on sale

Yet not every stock has participated in this recent rally. In fact, long-term investors -- whether growth- or value-oriented -- could do well to dig around for high-quality companies that have been beaten down in 2016. Here are four top stocks on sale this summer that I strongly suggest investors look into.

Gilead Sciences

In the healthcare space, shareholders of biotech blue chip Gilead Sciences (GILD 0.91%) have seen their stock's valuation contract 14% year to date. This weakness is being blamed on declining sales for its hepatitis C drug portfolio during the first quarter, as well as the expectation of increased HCV competition.

Image source: Gilead Sciences.

Despite these concerns, Gilead continues to hold more than 90% of HCV market share in the U.S., and it doesn't look as if it'll cede share anytime soon. Physicians and consumers trust Gilead's HCV solutions, which consists of Harvoni, Sovaldi, and its newest addition, a pan-genotypic oral medication known as Epclusa. Until there's a reason to switch (i.e., until there's a faster or seemingly more effective treatment), Gilead's HCV products should be expected to set the standard for treating the disease. What's more, only a small fraction of HCV patients globally have been treated so far.

Beyond HCV, Gilead has a growing portfolio of HIV products, and it's on pace to generate more than $15 billion annually in free cash flow, which gives it the opportunity to go shopping within the biotech space. Remember, the last time Gilead went shopping it acquired Pharmasset for $11 billion and got hold of the drug that went on to form the foundation of its HCV portfolio. At a mere seven times forward earnings, Gilead looks dirt-cheap.

Bank of America

For you bank lovers, Bank of America (BAC 3.35%) looks to be on sale as well, with its shares down 17% year to date. Bank of America has faced a triple-whammy of uncertainty tied to Brexit, weakened crude oil prices that have threatened its energy loans, and the U.S. Federal Reserve's reluctance to raise interest rates. Banks are highly interest-rate sensitive, and consistently low yields are punishing their net interest margins.

Image source: Bank of America.

Yet Bank of America could have a lot to offer long-term investors, which is a big reason why I'm a current shareholder and have considered buying even more. The prospect of interest rates rising to normal levels could quickly pump up Bank of America's profits. In its latest 10-Q filing with the Securities and Exchange Commission, Bank of America estimated that a 100-basis-point increase in short- and long-term rates would generate $6 billion in additional net interest income.

Bank of America is also cutting costs by closing branches as consumers make the shift to mobile banking. Regardless of whether interest rates rise sooner or later, Bank of America could boost its margins by being mindful of its spending.

After passing the annual stress test from the Fed, Bank of America also upped its dividend by 50% to $0.075 per quarter. With Bank of America trading well below tangible book value and boasting a forward P/E of nine, it could be a major bargain for long-term investors.

Baidu

For the growth investors out there, take a closer look at Chinese internet search engine Baidu (BIDU -0.56%), which is down 13% year to date. Much of the blame for Baidu's weak performance can be traced to China's slowing GDP growth and Baidu's push into online-to-offline (O2O) sales, which have weighed on its margins vis-à-vis higher spending.


Image source: Getty Images.

There's a lot to like about Baidu, and it starts with the company's search engine dominance in China. According to China Internet Watch, Baidu controls almost 81% of all Chinese search engine market share based on advertising revenue dollars in 2015. Its closest competitor is Google's China engine, with around 9% market share. Having such dominant market share makes it the go-to stop for advertisers and buoys its pricing power. 

Over the long term, O2O could be a monster growth story for Baidu. With O2O, Baidu is looking to keep internet users within its universe for an even longer period of time. Instead of just supplying consumers with the information they seek and then sending them off to a third-party site to complete their service transaction, O2O connects the user with offline services like food delivery or messenger services, allowing Baidu to benefit from these transactions and potentially exposing the consumer to more company-based ad engagements. It's a big up-front investment, but in a country like China, with its relatively low labor costs, O2O could be quite successful. 

At 22 times forward earnings, Baidu might not look like a great value from the perspective of the value investor, but its potential growth rate of 15% to 20% through the rest of the decade could quickly shrink its P/E ratio. It's on sale, and investors should take notice.

General Motors

Income investors looking to go bargain shopping could also turn to Detroit-based auto giant General Motors (GM -0.17%), whose shares are off 9% year to date. Its 2016 slump likely has to do with growth uncertainties in China, the U.S., and Europe, which have sapped shareholder optimism that GM's auto sales have room to move higher.


Baojun 560, one of China's top-selling SUVs. Image source: General Motors.

But I'd suggest that GM's sales and margins could improve over the long term. General Motors is still just scraping the surface of Chinese auto sales. China's burgeoning middle class is looking for newfound luxuries, and as infrastructure expands and new cities are built, the market for vehicles is bound to expand. Even with reduced growth prospects, China's economy is growing at a 6%-plus clip, pushing GM's Chinese sales 5.3% higher during the first half of 2016 compared to the first half of 2015. Even more importantly, SUVs have been particularly strong sellers in China, and SUVs carry juicier margins for GM than smaller sedans.

The low-yield environment and in-cabin innovations are also boons for GM's business. As long as rates remain low, consumers will have ample access to cheap capital to buy new vehicles. And General Motors' investments in infotainment systems are appealing to a younger generation of car buyers, potentially creating the emotional attachment that could build brand loyalty.

GM's nearly 5% dividend yield and forward P/E of around five make it an exceptionally cheap and attractive stock to consider buying.