Buy The Dip In These Quality Stocks
Markets worldwide are in sell off mode. Most fingers are pointing to China as the reason for the move lower, others are blaming the energy sector and the price of oil. The underlying theme has been this is a risk off market and if you believe that this is not the end of the bull market then there are several opportunities to buy high quality stocks at lower prices.
In the spirit of full disclosure, I should note that I am long weekly options in the first stock that I am highlighting.
Amazon
At a price just under $ 600, Amazon (AMZN – Analyst Report) is down roughly 12% YTD and it is a Zacks Rank #1 (Strong Buy). The stock hit a new on December 29 just south of $ 700, and the stock is down more than $ 100 since then. I should note that AMZN has an earnings ESP of 15%, which is a Zacks proprietary method used to forecast an earnings beat. Speaking of earnings, AMZN is set to release earnings shortly although an official date has not yet been set.
The company is on a string of four straight beats of the Zacks Consensus Estimate. The December 2014 quarter (last year) was a beat of $ 0.21 for an 87% positive earnings surprise. As a result, the stock moved higher by 16% in the session following the release. Sales came in at $ 29.3B, which means the $ 35.8B estimate for the current quarters anticipates revenue growth of 22%.
Goodyear Tire
Auto sales have been super solid all year and there is little indication that the trend will turn around. Add in the idea of an aging car fleet that has seen consumer opt to repair their cars instead of buying new one and you have a good recipe for success for Goodyear Tire (GT – Analyst Report). The stock is a Zacks Rank #1 (Strong Buy) and is down roughly 15% YTD. GT looks good for a number of reasons besides being a Zack Rank #1 (Strong Buy) including a value style score of “A.” The stock sports a forward PE of 7.6x which is well below the market multiple.
Shell Midstream
Despite the lower price of oil, this company benefits as the volume of oil used increases. The lower prices suggest to most that there is lower demand and thus lower volumes, but there is a supply explosion that has also put pressure on pricing. Shell Midstream (SHLX – Snapshot Report) is a Zacks Rank #1 (Strong Buy) that is down 13% YTD and could be a safer oil play for your portfolio.
While not a great value at 21x forward earnings, the $ 3B market capitalization calms some worry of it being too small. The stock also pays a 2.3% dividend.
Capital Senior Living
While a senior living home might be a great long term concept for investors, it might be even better for the short term. Capital Senior Living (CSU – Snapshot Report) is down 21% YTD and down almost 30% from highs the stock reached in early November.
There is a word of caution that must be used with CSU as the stock has a -500% Earnings ESP and trades at 234x forward earnings. The stock is in an industry that is in the top 37%, and is expected to see earnings growth of 18% when the company reports again in late February.
Cross Country
Unemployment numbers have come back all the way to pre great recession levels. That has made demand for skilled workers increase, so the need for staffing companies is high. The need only intensifies when you talk about the need for skilled nurses and that is where Cross Country (CCRN – Snapshot Report) comes in. The stock is a Zacks Rank #1 (Strong Buy) and is down 19.6% YTD.
The company is a small cap, with $ 430M in market capitalization but trades at a reasonable multiple of 19x forward earnings. This play also has a strong industry rank coming in at 24 of 265 for a top 9% ranking.
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