Some stocks are loved by investors while others are loathed. And while dumpster diving for bargains can be dangerous, it can also be immensely profitable. After sifting through the trash, I’ve discovered three left-for-dead stocks to buy that are coming to life.
The reasons for investors abandoning once promising companies are myriad. Sometimes its secular shifts in consumer preferences that sinks the ship. Other times its an economic downturn that sours sentiment and erodes earnings. Regardless of the catalyst, all companies fall out of favor from time to time. And that can create big opportunities if you’re able to spot when the stock’s resurrection begins.
Today’s trio of stocks to buy includes an aerospace juggernaut wrestling with disaster, a video game titan down on its luck and a construction giant grappling with slowing global growth.
The decade-long bull market has smiled upon video game stocks, especially Activision (NASDAQ:ATVI), which climbed almost 9-fold over six years before its inevitable comeuppance. Once the reality that earnings growth wasn’t living up to the lofty expectations finally settled in, shareholders bailed and bears ravaged the land.
From peak-to-trough, ATVI stock dropped 53% before buyers finally stopped in to halt the massacre. With valuations reset and price-to-earnings ratios brought back from orbit, there’s far less downside at this stage. The past nine months of consolidation has allowed the stock to stabilize and create a base to build its next uptrend on.
This week’s launch of World of Warcraft Classic reignited interest in ATVI, bringing it on the cusp of an upside breakout. Watch for a close over $52.50 to confirm, then deploy bull trades.
Boeing (NYSE:BA) was flying high until the tragic crashes of two 737 Max 8 planes cast a cloud of doubt over the company. The fallout cratered BA stock and it remains miles from its all-time high. Thus far, Boeing shares have fallen as much as 28% from their February peak of $446.01.
But, a close inspection of recent price action reveals some promising signs. Last week’s rally was particularly impressive both in its magnitude and participation. The three-day pop carried BA stock over 11% higher before profit-taking struck. During the surge, the stock notched its highest volume up day since March, suggesting big buyers could be returning to the fray.
Re-establishing itself back above the 20-day, 50-day and 200-day moving averages is also improving the technical posture. Multiple resistance levels remain overhead, but this is a solid start to what could turn into a trade-able bottom in the stock.
The past two years have pushed Caterpillar (NYSE:CAT) deep into bear market territory with a decline of 32%. Slowing global growth coupled with increasing fears of a recession in the U.S. and the never-ending trade war have created a toxic backdrop for the company.
But with CAT stock down six weeks in a row as well as testing and holding major support, betting on a bounce is starting to look attractive. Yesterday’s support test and surge revealed buyers are aggressively defending the $112 zone. Plus, the daily downtrend showed slowing momentum into the low.
We need to see upside follow-through before pulling the trigger though. Watch for a break above $119.50 to confirm.
As of this writing, Tyler Craig held bullish positions in ATVI. Check out his recently released Bear Market Survival Guide to learn how to protect your portfolio from the next market crash.