Despite the market meltdown from earlier this week, there are still some attractive stocks to consider as we head into the Fourth of July holiday weekend.
In fact, Monday’s stumble may well make some companies with great underlying stories even more attractive stocks to buy. After all, there’s nothing better than a good stock at a suddenly better price.
The key is finding stocks that won’t keep running with the current selloff, and instead will explode higher after this weekend’s fireworks.
In no particular order, here are nine stocks to buy because they’re capable of making their own fireworks, rain or shine.
Stocks to Buy: GameStop (GME)
There’s no way to deny the advent of mobile devices like tablets and smartphones has been a bit of a headache for video game retailer GameStop (GME). It’s simply cheaper and faster to download a game — for consoles as well as for hand-held devices — than it is to pay for one at a bricks-and-mortar venue.
GameStop, however, has dealt with this paradigm shift better than some investors might appreciate though. Last quarter, GameStop’s digital sales grew 17% … the biggest year-over-year increase for any of its segments.
The biggest and best reason GME has earned a spot on a list of stocks to buy right now, however, is the even less-realized reality that GameStop is a highly diversified company.
Aside from video games, it also operates Simply Mac, Spring Mobile and Cricket. And, in early June, GME announced it was diversifying further by acquiring collectible and novelty e-tailer business ThinkGeek.
The last quarter of the year could be much better than anyone anticipates if GameStop integrates ThinkGeek well.
Stocks to Buy: Verizon Communications (VZ)
Most investors are aware that Verizon Communications (VZ) recently acquired web giant AOL largely for its programmatic ad-sales platform that maximizes the revenue potential of online video.
What most investors don’t realize about VZ — and the reason VZ is one of only a few stocks to buy thanks to upcoming catalysts — is just how revenue-ready Verizon is with the product it plans to unite with the AOL-created technology.
While an exact launch data has yet to be given, the word on the street is that this mobile video service is slated for launch in the late summer.
It’s going to be a so-called over-the-top service, allowing viewers to watch online video without also being a traditional cable subscriber with a coaxial cable feed; some could see it as an alternative to traditional cable.
More uniquely, it’s going to be ad-supported rather than subscription-supported, monetized by advertising the same way network broadcast television is.
Most important of all to current VZ shareholders is, the debut is right around the corner. Verizon might well be the first to the market with this particular model.
Stocks to Buy: Capital One Financial (COF)
The theories regarding the impact of rising rates on financial stocks are mixed, though most agree that the impending increase in interest rates is ultimately gong to be good for Capital One Financial (COF).
And COF was a pretty good-looking stock to begin with.
The “edge” that Capital One Financial has on other rate-sensitive instruments like bonds and steady dividend payers like utilities is its ability to widen margins as borrowing costs move higher without putting itself at any real risk of lost business. Consumers still love credit cards, and will regardless of how far interest rates rise.
The potential fireworks that qualify COF as one of a few stocks to buy headed into the second half of the year is the potential growth that its unusual mix of credit card loans and bank deposits jointly create. It may well result in another big — and unexpected — dividend increase like the one it announced last month.
Stocks to Buy: Amgen (AMGN)
Betting on a drug’s approval can be more than a little dangerous. When the company in question is Amgen (AMGN), however, it can’t hurt to at least take a closer look at a wager.
Long story short, Amgen has not one but two big PDUFA events (deadlines for the FDA to make a decision on a drug) slated for June. The Food and Drug Administration is expected to make a call on Kyprolis as a treatment for relapsed multiple myeloma by July 26, with a decision on Talimogene laherparepvec — or T-VEC — as a therapy for melanoma due by July 28.
The encouraging part of the story is that Kyprolis had already been approved as a therapy for multiple myeloma, while T-VEC has demonstrated tremendous efficacy thus far.
Even so, AMGN belongs on a list of potential stocks to buy only for traders who can truly stomach the potential downside of an FDA rejection.
Stocks to Buy: USG Corporation (USG)
The drywall business may be incredibly boring, but that doesn’t mean it can’t be profitable. USG Corporation (USG) turned the profit corner in 2013, swinging from years’ worth of red ink to positive earnings that year, and never looking back.
Indeed, USG may be on the verge of going from good to great.
Driving that forward progress is a housing market that’s undeniably shaping up. In May, the pace of new-home sales in the United States reached a multiyear high of 546,000 units. And the number of building permits issued last month hit an eight-year high rate of 1.1 million, even if starts slumped a bit.
It’s the best sign yet that the housing (and housing construction market in particular) is on the mend in a meaningful way. That means construction crews are going to need materials to build with, which in turn means USG Corporation may finally see demand for drywall start to soar.
And if the housing stats don’t convince you USG Corporation is one of this summer’s best stocks to buy, this might — the pros expect profits per share of USG to soar from last year’s $1.19 to $1.72, translating into palatable P/E of 16.
Stocks to Buy: FireEye (FEYE)
There’s no denying cybersecurity has been one of this year’s (and last year’s) hot buttons, which has been a real boon for cybersecurity service providers like FireEye (FEYE) and its peers.
On the other hand, there’s also no denying FireEye has a lot of peers, and most of them aren’t terribly profitable — nor are they expected to be wildly profitable in the foreseeable future.
So what makes FEYE one of the market’s top stocks to buy in anticipation of future fireworks?
It’s a potential takeover target.
That’s admittedly a tough reason on its own to own a stock … perhaps even worse than betting on a biotech stock in anticipation of a key FDA approval. In the case of FireEye, however, the rumors of a potential buyout have been a little too credible and a little too frequent to dismiss.
Yes, Barclays downgraded the stock just last week. It wasn’t a downgrade driven by an industry headwind or company-specific problems, though. It was just a valuation impasse, which may well be obliterated by another surge in cyberattacks.
Stocks to Buy: AT&T (T)
It was announced so long ago that most investors may have forgotten it was on deck, but AT&T (T) is expected to complete its purchase of DirecTV (DTV) in July, after the FCC finally decides what stipulations will be required to ensure the deal doesn’t create non-competitive issues.
Experts widely agree, however, that the union is going to be allowed.
The $64,000 question is, what will the company look like and perform like once T and DTV are one and the same?
In short, it should be a brilliant pairing. Barclays analysts opined:
“While management has already raised the bar on potential cost synergies ($2.5B vs. prior $1.6B outlook) we believe further opportunities exist specifically around reduced investment in legacy access infrastructure. Incremental revenue synergy benefits from cross-selling (~$0.10-$0.15) coupled with a potential shift towards capitalization of fulfillment costs (~$0.25-$0.30) provide a cushion for AT&T’s near-term earnings trajectory and creates the potential for $3.00+ in earnings power, in our view.”
And this could all be put into place in less than two weeks.
Stocks to Buy: Iconix Brand Group (ICON)
The company name might not ring a bell, but the brand names that are part of the Iconix Brand Group (ICON) family will. It’s the outfit that owns Joe Boxer, Ocean Pacific, Umbro, Candies and a slew of other brand names you’ll see on your favorite retailer’s shelves.
Those who know ICON well may also be a little surprised it’s on a list of stocks to buy this summer, as the company will soon be facing a major legal headwind in the form of a class action lawsuit brought forth by Iconix Brand Group shareholders. The basis for the suit is a claim that Iconix knowingly misstated its results between 2013 and 2015, causing them to look better than they really were.
There might be some validity to the claim. There might not. But even if there is, current or would-be ICON investors should know most class action lawsuits of this ilk tend to get little to no traction in a courtroom. And even if this suit has teeth, suing a company you partially own is tantamount to suing yourself. Any monies recouped have been or will be offset in the price of the stock.
In fact, if anything, the worst-case scenario of the lawsuit may already be fully factored into the price of Iconix Brand Group shares.
What might not be priced into the stock’s price yet, however, is the upside that will materialize later this year. A new Peanuts movie is scheduled to be released on Nov. 6. That’s an important date to Iconix, since Peanuts is also one of the brands it manages.
Look for Peanuts merchandising to ramp up all the way to and even past that date.
Stocks to Buy: General Electric (GE)
Last but not least, General Electric (GE) may be big, boring, and predictable, but it’s also got a lot more going for it now than it did just a few months ago. Namely, GE has waded waist-deep into its effort to streamline its operations by shedding distracting divisions, with most of those planned divestitures coming from its finance arm.
All told, General Electric says it’s looking to sell $275 billion worth of GE Capital and its separate divisions.
The bigger and better reason General Electric has earned a spot on a list of stocks to buy because of impending fireworks, however, is that it’s buying back up to $50 billion worth of GE shares. That’s the world’s second-biggest-ever share repurchase program, and will likely have a more direct impact on the price of GE shares than the cash-boost created by multiple divestitures will.
And to be clear, this stock buyback is just getting started. General Electric only announced it in April, so any the benefit of the repurchase has yet to be priced into the stock’s value.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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