Watch for the Best Buying Opportunities!

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With the June coming soon, I’ve been reflecting upon the first-quarter earnings season thus far. And with each earnings report, it is becoming increasingly clear just how challenging of an earnings season it has been.

Examining a microchip

Source: ©iStock.com/MADDRAT

I understand all too well how frustrating it is to see profit-taking, but there is a reasonable explanation for this … and even a silver lining to it.

The fact is that we are in the middle of a rotational correction. This started in the second week of April, when many semiconductor stocks — including Avago Technologies Ltd (NASDAQ:AVGO), NXP Semiconductors NV (NASDAQ:NXPI) and Skyworks Solutions Inc (NASDAQ:SWKS) — got hit with profit-taking.

The interesting thing was that there was no company specific reason for it, other than the fact that a few other chipmakers had lowered their sales forecasts. This was compounded by the fact is that all three of our smaller chipmakers have rallied impressively in recent months.

At the time, I believed that many jumped the gun on selling their shares. The fact remains that AVGO, NXPI and SWKS are trading at attractive valuations and have excellent forecast sales and earnings growth. So, I kept all three stocks at “buy” ratings. And sure enough, AVGO, NXPI and SWKS have rebounded impressively since the end of April.

It’s important to know that when winners in a certain industry are hit, this opens up buying opportunities. I already screen our stocks for fundamental attractiveness, and make sure that the valuations aren’t too high.

So, while it can be frustrating to see an A- or B-rated stocks pull back after earnings, in many cases pullbacks are the results of investors looking for excuses to take profits. And sometimes the reason for the selloff is clear (sales or earnings miss, reduced guidance, etc.).

The bottom line is that I see this rotational correction as a good thing. The fact is that money is not leaving the market; it’s just getting reshuffled. So, whenever you see a highly rated stock fall, your first reaction should be recognize the excellent buying opportunity.

If you need further proof, simply pull up a historical chart of the following stocks to buy: Altria Group Inc (NYSE:MO), Anthem Inc (NYSE:ANTM), Centene Corp (NYSE:CNC), HCA Holdings Inc (NYSE:HCA), Lockheed Martin Corporation (NYSE:LMT), McKesson Corporation (NYSE:MCK) and UnitedHealth Group Inc. (NYSE:UNH). Each of these stocks pulled back after earnings and have since recovered.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/05/profit-taking-avgo-nxpi-swks-buying-opportunity/.

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