Some stocks are destined to change the world. Today we examine three stocks to trade that definitely changed how the world works: Facebook (NASDAQ:FB), Caterpillar (NYSE:CAT), and Boeing (NYSE:BA), all three deeply impacted humanity as we know it in major ways. Boeing changed how we commute long distances, Caterpillar made it easier to develop societies, and most recently Facebook changed the way we connect with loved ones friends and families across the globe. Each in its own right made the planet smaller and more user-friendly.
But did earnings make them more trader friendly? Each of these stocks to trade has also had its share of less-than-savory headlines.
All three of these stocks to trade recently reported earnings and the reactions in their stocks varied. Nevertheless these three stocks are still good ones to accumulate or hold. But keep in mind that U.S. stock markets are near all-time highs so taking any bullish position now has inherent risk. So I don’t recommend taking full positions all at once. This leaves room to add on dips. And I never risk more than I can afford to lose.
Facebook (FB)
Last night, Facebook reported earnings and FB stock soared to all-time high levels. This after a day that started really red for Facebook. The night before, news broke that Facebook would be of a record $5 billion over privacy breaches as well as be subject to additional government oversight. CEO Mark Zuckerberg also announced “some major structural changes to how we build products and run this company.”
Even though these were unprecedentedly bad headlines, this Facebook stock shrugged them off and rallied more than 1% into the close. And then the earnings came out and it spiked FB to all-time highs as they beat all metric expectations leaving very little for the bears to sink their teeth into.
Simply put, it is hard to deny great results and to do so in the face of so many headwinds political and otherwise is truly jaw-drop inspiring. Clearly Facebook management team is doing all it can to satisfy its investors and the public opinion alike. The fundamentals of the Facebook stock are solid even though it sells at a high multiple to its forward sales. It does have the cash to support it and the growth to inspire it.
This is a company that has not yet disappointed back-to-back with its efforts. So the bulls will continue to buy the dips. Sure there are still political hurdles, but in the end the politicians will get tired of the I hate Facebook meme and move on to another soapbox that is fresher.
Boeing (BA)
The Boeing situation is very similar to that of Facebook. This is a prior star on Wall Street whose sheen has dimmed of late. The tragic crashes that killed so many people are reason enough to warrant severe scrutiny.
To that, the Boeing stock has suffered tremendously — as it should have. And the momentum that should have followed earnings results has been severely hampered. Recently BA set a price tag of $5 billion to the extra costs stemming from the 737 Max debacle. Although this is not a fixed cost, it does alleviate most of the uncertainties around it for investors.
But Wall Street hates the unknown, so when BA announced the charge last week the stock rallied. Yesterday BA stock fell 3% on their earnings report but it could have been much worse given the circumstances.
Management missed the mark, so in light of the absence of any good news investors acted very tamely with the BA stock. Especially that the delays for the 737 Max continue to persist. They may even cut production levels more.
Yet and in spite of the deluge of bad news and the complete absence of any good news, BA investors still buy the dips and the stock is 18% from its all-time highs. So this is reason enough to hold the stock for the long term. It may even be a good time to start building a position if not in it already. Once the Max model is allowed to fly, BA stock should also soar with it.
Caterpillar (CAT)
This one is a bit trickier since CAT stock has been struggling for so long. In April of last year, the Chief Financial Officer Bradley Halverson told investors that they may be be at a “high watermark” for the year. His words were prophetic because the stock started a 25% slide in spite of a great earnings report and it hasn’t yet recovered.
Unlike for BA or FB stock, investors are selling the rips in CAT stock. But on a wider span of time. The stock has been recovering from January 2016 lows and even though it has been falling since January 2018, this is part of normal price action. The CAT bulls did a great job rebounding off 2016 lows and they are now retesting the half-back test of this rally. Fibonacci levels are important for Wall Street traders as they tend to repeat themselves. So as long as Caterpillar stock stays above the $117 per share zone then the 2016 recovery efforts are still ongoing.
So why own it now?
The technical make up on the charts. CAT has been setting lower highs and bouncing off a floor just above $120 per share. This is a long term pivot level so it is likely to hold. Then the bulls would have sure footing to break through the descending trend line of lower highs and rally and try to recover better levels gone by.
CAT was once a beloved stock and it can be that again. The fundamentals support that theory since it only sells at a 13 trailing price-to-earnings ratio and 1.4 times sales. These are humble valuations that leave very little fluff. There is no more fat on this bone, and soon, the meat will attract the fundamental buyers once more.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room free here.
