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3 Top Stocks to Buy During This Sell-Off

By Zhiyuan Sun - May 21, 2021 at 6:20AM

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Looking to capitalize on the recent market turmoil? Here are your best bets.

Over the past month, the NASDAQ 100 index has fallen by approximately 3%. That's only for large names included in the benchmark. Many under-the-radar stocks -- especially those in the tech industry with a high beta -- have fallen even further. 

The good news is that buying the dip when others are afraid to dive in can be a solid way to make money in the long run. Indeed, shares of BlackBerry (BB -2.74%)Sundial Growers (SNDL -2.81%), and AMC Entertainment (AMC 7.56%) are all on sale. Let's look at why now might be the ideal time to go long on these stocks.

Woman buying item on laptop with credit card.

Image source: Getty Images.

1. BlackBerry

In 2014, BlackBerry was a struggling smartphone manufacturer with $6.8 billion in sales but losing $343 million a year in cash. Fast forward seven years, and the company has entirely exited the smartphone market and made the transition into enterprise software.

Its revenue fell to just $900 million in 2020. However, the company managed to turn a profit of $74 million. Currently, its cybersecurity technology has the ability to secure 96% of the enterprise landscape. BlackBerry provides businesses with protection against malware, malicious third-party apps, phishing software, and more.

The company has also made tremendous progress in Internet of Things (IoT) integration, such as in self-driving car software. Eighteen of G20 governments, nine out of the top 10 global banks, and nine out of the world's top 10 automakers use BlackBerry's technology.

Approximately 90% of its revenue is recurring, giving it stability in addition to its high margins. With $439 million in cash net of debt and a valuation of 5.4 times revenue, this is a promising tech stock worth considering buying while it's trading for cheap.

2. Sundial Growers

Shares of Canadian marijuana company Sundial Growers are down a stunning 75% from their February highs. Investors were highly disappointed by its Q1 2021 earnings report. Sundial's vape, flowers, pre-rolls, and oils have become unpopular with consumers. Sales declined by 32.2% year over year to CA$9.9 million. Keep in mind that this is a company with a market cap of $1.4 billion. 

Stunningly enough, Sundial Growers posted its first-ever positive operating income less non-cash items (EBITDA) in the quarter. The company invested CA$96 million into other growers in the Canadian pot industry and generated CA$15.7 million in non-cannabis revenue.

That brings up the main focus -- Sundial Growers is looking more like a cannabis financier than an operator. The company has no debt whatsoever, compared to a stunning cash balance of CA$746 million. This leaves the company with an enterprise value of only CA$590 million, which does not account for the value of its long-term investments.

It is also working to improve its poor pot issue. The company announced it would be acquiring Inner Spirit and the Spiritleaf retail cannabis network for CA$131 million in May. Inner Spirit runs 19 stores and operates an additional 67 franchise locations. In the fourth quarter of 2020, Inner Spirit's revenue and EBITDA margins improved by 13.6% and three percentage points sequentially, to CA$9.2 million and 19%. At the end of the day, Sundial Growers is a cannabis company with an unconventional turnaround story. If its cannabis financing ventures interest you, the stock might be worth a chance.

3. AMC Entertainment 

During Q1 2021, theatre chain AMC Entertainment's revenue declined by 84.2% year over year to $148.4 million. Meanwhile, its cash flow from operations fell 129% to a loss of $312.9 million over the same period. It attracted just one-tenth of its pre-COVID audience to its theaters. 

With these poor results, investors are probably wondering why AMC Entertainment is a screaming buy instead of a textbook no-go stock. The answer lies in its valuation and hopeful massive revenue rebound. Right now, the company's market cap stands at just $828 million. On May 13, AMC Entertainment sold $428 million in stock, giving it a total liquidity of $1.4 billion to offset its temporary losses. 

That's more enough cash for AMC to hold out until more people are vaccinated and the economy fully reboots. The company operated its 538 movie theaters at just 15% to 60% capacity in the first quarter. What's more, only 27% of its 97 international theaters were partially open.

Once mask mandates and social distancing measures end, AMC Entertainment has a good chance of bringing back its full pre-COVID revenue. In that scenario, the stock could be extremely undervalued trading at just 0.2 times sales. For these reasons, AMC Entertainment is a great contrarian stock to consider. 

Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry. The Motley Fool has a disclosure policy.

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Stocks Mentioned

SNDL Inc. Stock Quote
$2.77 (-2.81%) $0.08
BlackBerry Stock Quote
$6.74 (-2.74%) $0.19
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$25.46 (7.56%) $1.79

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