The Best Cheap Stocks to Buy When the Market Pulls Back, According to Investor Sarat Sethi

In a market exhibiting uncommon dynamics, the traditional saying that stocks take the escalator up and the elevator down is being challenged. Unusual as it may seem, recent trends indicate that stocks are experiencing a swift ascent and a more gradual descent, marking a departure from conventional wisdom.

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Micron Technology Inc., a key player in the chip sector, is gaining attention as a noteworthy Artificial Intelligence (AI) play. Stifel analyst Brian Chin upgraded Micron's stock from hold to buy, citing its advantageous position in what he describes as a "more multiple-friendly, early expansion period." Furthermore, Micron is seen as increasingly aligning with AI and high-bandwidth memory, emphasizing a strategic move into the technology frontier.

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Chin specifically highlighted Micron's conversion of Dynamic Random-Access Memory (DRAM) wafer capacity to high bandwidth memory, noting the potential benefits. The recent announcement of the initiation of volume shipments for its High Bandwidth Memory 3E (HBM3E) solution, integrated into Nvidia Corp.'s H200 chip, was seen as a positive confirmation of Micron's progress in achieving its revenue targets.

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The recognition of Micron as an AI-relevant stock is not an isolated sentiment. Investors are considering Micron shares as compelling, given their valuation relative to growth expectations in the AI sector. Chin's favorable outlook also takes into account the tightening supply of DRAM, signaling a potential recovery into the 90s by mid-year, even as broader electronics demand is yet to strengthen.

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Meanwhile, in the electric vehicle (EV) space, Rivian Automotive Inc. is drawing comparisons to Tesla, capturing a similar innovative spirit. Jefferies analyst Philippe Houchois initiated coverage on Rivian with a buy rating and a price target of $16, indicating a substantial 45% upside from the previous day's close. Houchois commended Rivian for possessing its own software stack, a strong brand identity, global potential, and shared growth challenges with Tesla.

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However, he acknowledged distinctions, noting that Rivian's product concepts and manufacturing processes are currently more conventional. Despite this, Houchois expressed confidence in Rivian's trajectory, emphasizing that the company has been given more time and capital than many of its start-up counterparts.

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Switching gears to investment strategies during market pullbacks, investor Sarat Sethi provides insights into potential opportunities. Sethi highlights pharmaceutical companies Johnson & Johnson and GSK in the health-care sector as "very cheap stocks," with both showing positive performance this year. In the industrials sector, Sethi recommends considering major copper producer Freeport-McMoRan and oilfield services company Schlumberger, anticipating benefits from increased demand for hybrid and electric vehicles.

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In the realm of major technology stocks, Sethi underscores the discounted valuation of Alphabet, emphasizing its potential for nearly 24% growth according to analysts' projections. However, Sethi suggests caution in approaching other strong tech companies and AI plays, such as Nvidia, Microsoft, and Meta, due to their elevated valuations. He advises investors to prioritize diversification, acknowledging the sustained growth of these companies while being mindful of the broader market landscape.

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In conclusion, the current market dynamics present a unique backdrop where Micron and Rivian stand out as promising plays in the chip and EV sectors, respectively. Simultaneously, investor Sarat Sethi's strategic recommendations shed light on potential opportunities in health care, industrials, and technology, urging investors to navigate the evolving market with a diversified approach.

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