Some of last month’s biggest losers could change course in August, according to two traders.
Energy and travel stocks were among the worst performers in July, weighed down by concerns about the spread of the delta variant of Covid.
Las Vegas Sands, Diamondback Energy and Carnival Corp. were among the main laggards in the S&P 500, down 20%, 18% and 18% respectively.
A lesser-known name that ended July in the red has the potential to erupt this month, Washington Crossing Advisors’ Chad Morganlander told CNBC’s “Trading Nation” on Monday.
“What we’re suggesting you do is avoid shoddy names at this point in the market cycle and you’re looking at a company like Baxter,” a healthcare equipment company, Morganlander said, co-founder and senior portfolio manager of his company.
While many energy and travel stocks tend to have high debt levels and uncertain profit forecasts, Baxter has low debt, high visibility, “is constantly growing. [and] always profitable, ”he said.
Baxter stock is down nearly 6% since early July.
“They’ve got around $ 13 billion in revenue and they’re growing. And they’re going to grow pretty consistently. The valuation also makes sense, trading at a forward-looking level. [P/E] of 19 times, “Morganlander said.” That’s what you want to buy at this point in the market cycle. “
Another name under the radar stood out for Oppenheimer’s chief technical analysis officer Ari Wald.
“You want to be tactical, you want to buy withdrawals, but you want to buy when there is long term strength behind it, when there are macro conditions favorable to those themes as well,” Wald said in the same interview.
His choice was Digital Turbine software, which fell more than 17% in July.
“What separates it from other stocks is that there are macroeconomic trends that support it,” Wald said of the $ 6 billion mobile advertising company, citing its high growth profile and ability resist volatile rates and commodity prices.
“After the big boost it had at the start of the year it corrected very strongly from February to May and now it is building a base above its 200 day moving average and we think it is showing signs ascent, ”said Wald.
“For us, the key level is $ 62. That’s the 200-day average,” he said. “For traders I think you put your stops there, but if not it ticks all the boxes, it is also taken out, there is an opportunity here and with that, a longer term force behind it.”
Digital Turbine finished up just over 1% at $ 63.65 on Monday.
Disclosure: Washington Crossing Advisors holds shares of Baxter International in its Rising Dividend Portfolio.