Undervalued stocks are nothing new on Wall Street. And Goldman Sachs making a bullish call to defend a company’s shares is not exactly news either. But combine the two and add in price charts that confirm a bottom, and it’s clear that there’s plenty of potential in some underloved stocks. Specifically, I’m talking about the diversified and superior potential in American Airlines (NASDAQ:AAL), Under Armour (NYSE:UAA) and Regeneron Pharmaceuticals Inc (NASDAQ:REGN).
There are bulls in investing and then there’s Goldman Sachs. One of the market’s most storied investment firms certainly maintains reasons for being generally optimistic in its market calls. That’s not to say Goldman isn’t making prop side bets or that it’s always bullish. But when it comes to paying customers, underwriting and the likes, a bull market is good for business.
Given how this well-oiled machine operates, a buy recommendation from Goldman isn’t exactly a rarity. Nevertheless, when the firm’s chief U.S. strategist acknowledges major market headwinds, but sees superior upside potential in several undervalued stocks — such as Netflix (NASDAQ:NFLX) and Freeport-McMoRan (NYSE:FCX) — with 50% or more upside, it’s time to take notice.
But from there, we can whittle down that list of names to these three stocks to buy, since they have charts that can actually justify all the fuss. With that said, let’s dive a little deeper into what makes AAL, UAA and REGN stock worth a buy.
Undervalued Stocks to Buy: American Airlines (AAL)
As most investors may be aware, AAL stock has been left behind over the past few years while the broader market has continued to rally to all-time-highs. Shares are also down several percentage points since Goldman’s initial call.
But now AAL looks ready to take-off!
American Airlines’ weekly chart has confirmed a large pattern double bottom dating back to 2016 with a smaller variation of this formation. With shares of this undervalued stock also showing a supportive stochastics divergence during the development of the just-completed double bottom, it’s time to go long AAL stock with confidence.
AAL Stock Strategy: Goldman sees upside potential nearing 60% over the next 12 months for this undervalued stock. Use the failure of the paired double bottoms to contain losses if needed and take initial profits at $35 for a stronger risk-adjusted position.
Under Armour (UAA)
Under Armour is the next of our undervalued stocks to buy. Shares have been rallying for the last two years since initially falling out of favor with growth investors back in 2016, which was compounded by a series of missteps and earnings disappointments. But while UAA stock has gained ground since bottoming in 2017, as this past summer’s price action attests, it hasn’t been without incident.
The good news is right now the home field advantage on the price chart goes to bullish investors in shares of Under Armour.
UAA Stock Strategy: Goldman sees about 65% upside possible for UAA stock. I see diversification, a stop-loss slightly beneath the higher-low pattern low at $17.35 and a bonafide slam dunk if this undervalued stock can capture the firm’s price objective. However, I’d gladly take the opportunity to trim profits along the way and inside the last earnings gap near $25 a share.
Not that I’ve saved the best for last, but this undervalued stock to buy does happen to have the largest potential for upside according to Goldman. The firm estimates Regeneron has room to run by roughly 79%. What shares also have going for them is a prolonged bearish market of nearly four years. This may have finally bottomed on the monthly price chart.
This view of REGN stock reveals shares have just confirmed a fresh lower low pivot within the biotech’s downtrend. With the September pivot just narrowly undercutting the last important low from 2018, a double bottom is in place on the monthly chart. Because the pattern also has the backing of a bullish oversold stochastics crossover, this undervalued stock is a name to buy today.
REGN Stock Strategy: Use an out-of-the-money bull call spread because of the risks associated with biotechs like REGN stock and its long history of price volatility.
I’d also suggest sticking with the chart for exiting and taking profits along the way. Specifically, use $270 for containing downside exposure and $400 – $425 for reducing upside risk.
Disclosure: Investment accounts under Christopher Tyler’s management currently own positions in Under Armour (UAA) securities and its derivatives but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.