U.S. equities are recovering from early-session losses in Wednesday’s midday trading as the bulls do everything in their power to push the Dow Jones Industrial Average back up and over its 50-day moving average — maintaining the tight two-month consolidation range centered on the Dow 20,650 level. Stocks to buy with any conviction are a rarity.
Popular large-cap stocks are largely treading water. Investors are worried about high valuations and a murky policy outlook out of Washington, but they’re not fearful enough to actually take cash off the table.
Moreover, with the Q1 earnings season about to start, everything feels like it’s in stasis.
But there are pockets of activity, if you know where to look. In fact, a number of stocks — suffering from lowered expectations and bombed-out share prices — look like interesting turnaround plays at the moment.
Here are five stocks to buy as they climb their way out of the abyss:
Rebound Stocks to Buy: Under Armour (UAA)
Under Armour Inc (NYSE:UA, NYSE:UAA) shares are down more than 60% from their early 2016 highs and have been trading below their 200-day average since last summer as the company’s fortunes have darkened amid increased competitive pressures, a loss of product momentum and a generally tough retail sales environment.
Shares were initiated with a “Neutral” rating on Wednesday by analysts at Wedbush, who noted possible upsides including expense control and merchandising improvements.
As a reminder, UA shares are Class C and have no voting rights. The UAA ticket are voting Class A shares, but are diluted by the heavy allocation of untraded Class B shares held by management.
The company will next report results on April 27. Analysts are looking for a loss of 4 cents per share on revenues of $1.11 billion.
Rebound Stocks to Buy: Tempur-Pedic (TPX)
Mattress maker Tempur Sealy International Inc (NYSE:TPX) has suffered a nasty decline of nearly 50% from its September high as a result of increased competitive pressures from “mattress-in-a-box” players and the loss of its retailing agreement with Mattress Firm, which accounted for 21% of its 2016 sales.
Closeout pricing will weigh on profitability over the near term, but efforts to invest in its marketing and product development efforts should pay dividends into 2018.
Raymond James analysts recently upgraded the stock to “Buy,” while Wedbush analysts believe TPX and Mattress Firm will likely come back to the negotiating table because of the mutually destructive nature of their sales contract termination.
The company will next report results on May 4 before the bell. Analysts are looking for earnings of 69 cents per share on revenues of $720 million.
Rebound Stocks to Buy: GrubHub (GRUB)
GrubHub Inc (NYSE:GRUB) shares drifted lower out of a multimonth trading range in March, pushing the stock price down about 25% from its 2016 highs. The selloff followed the reporting of weaker-than-expected quarterly results back in February, with earnings of 23 cents per share two cents below estimates.Still, the pullback was to be expected after an epic 100%-plus rally out of the early 2016 low. Quarterly revenue growth of nearly 38% remains impressive as was a 21% increase in active users of its food-to-go service.
Analysts at Oppenheimer and Pacific Crest have both upgraded the stock in recent weeks.
GRUB will next report results on May 3 before the bell. Analysts are looking for earnings of 24 cents per share on revenues of $153.1 million.
Rebound Stocks to Buy: Abercrombie & Fitch (ANF)
High-end hoodie-maker Abercrombie & Fitch Co. (NYSE:ANF) hasn’t belonged on anyone’s list of stocks to buy for years now. ANF remains in the midst of a long, six-year decline that has seen shares lose more than 80% of their value. Teenager fashion tastes have shifted and the retail sales environment has generally become more difficult.
The last touch of the 200-week moving average was in early 2016, after which the stock lost two-thirds of its valuation.
The key for a turnaround will be the success of a dramatic evolution of its core Abercrombie brand into a new, more mature, personalized style versus the loud, fragranced, suggestive theme of the recent past.
ANF will next report results on May 25 before the bell. Analysts are looking for a loss of 70 cents per share on revenues of $650.9 million.
Rebound Stocks to Buy: Gap (GPS)
Gap Inc (NYSE:GPS) continues to languish in a three-year-long sideways stasis, down more than 40% from the high set in late 2014. Product missteps — especially at its core Gap brand — and a difficult retail sales environment have weighed on results.
A turnaround effort is underway, however, with new leadership and a discontinuation of monthly sales reporting focusing investors on the bigger picture including an effort to shorten the supply change. This will help the company react quicker to changing retail trends.
GPS will next report results on May 18 after the close. Analysts are looking for earnings of 29 cents per share on revenues of $3.4 billion.