Two traders pick two underperforming stocks to buy now
- Two traders predict that stocks in a couple of sectors that did not perform well could do well this August.
- Stocks in the energy and travel sector were the biggest losers in July due to the rise of the delta variant.
- Stocks in the S&P 500′s made slow progress and were as down as by 20% and below.
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On Monday, in a recent interview on CNBC’s “Trading Nation,” Chad Morganlander and Ari Wald said that the stocks in the energy and the travel sector did not perform that well due to the spike in the delta variant of the coronavirus. According to them, some of the stocks in the respective sectors were among the worst performers in July. However, they are optimistic that this August, tables could turn, and stocks in the red last month could turn green in August.
Baxter stock as a rebound play
Notable S&P 500 members like Las Vegas Sands Corp. (NYSE: LVS), Diamondback Energy Inc (NASDAQ: FANG), and Carnival Corp (NYSE: CCL) dropped down 20%, 18%, and 18%, respectively. Additionally, Baxter International Inc (NYSE: BAX) stock is reportedly down close to 6% since the beginning of July.
Should investors buy the weakness in any of these names? According to Washington Crossing Advisors co-founder and senior portfolio manager, one name in particular sticks out. Instead of buying into “low quality names”, Baxter should be bought after falling around 6% in July and 10% in the quarter. He explained:
They’re growing and they’re going to be growing in a rather consistent manner. The valuation makes sense also trading at a forward looking PE of 19 times. They’re consistently growing consistently profitable. Don’t have a lot of debt, very predictable, high, high quality name. That’s what you want to buy at this point in the market cycle”
Digital Turbine is a safe bet
Oppenheimer’s head of technical analysis Ari Wald prefers buying another stock amid recent weakness: software company Digital Turbine Inc. (NASDAQ: APPS). Also speaking on “Trading Nation,” Wald said Digital Turbine stands out from other beaten up stocks because of the “macro trends that support it.” He said:
After the big run-up it had at the start of the year, it corrected very sharply from February to May and now it’s building a base above its 200-day moving average and we think showing signs of turning up, for us, the key level’s $62. That’s the 200-day average. For traders, I think you place your stops there, but otherwise, it checks all the boxes, it’s also pulled back, there is opportunity here and with it, some longer-term strength behind it.”
