By Johnson Research Group
The market handed investors a rude awakening on Monday when all of the benchmark indices opened to massive selling pressure.
While Tuesday saw a significant rebound mostly across the board, our research suggests that the selling will likely extend into September. And it’s still important to remember that the best time to buy is when everyone else is selling.
The rule is a little oversimplified, but remembering that it is always best to invest in stocks that are technically strong and woefully under loved, is all that you need to find the real bargains during this, or any, correction.
The following three stocks are flashing serious buy signals on the heels of the massive selling.
Netflix (NFLX) is one of the best buys on the market’s recent roller coaster ride. The online media entertainment company has been on a tear as the sector transitions through massive fundamental changes at the hands of Netflix.
Netflix is in that special place where the institutional traders are acquiring shares as the company’s market innovations continue driving fundamental value.
For comparison, there are currently 613 institutional owners of NFLX compared to 2,409 institutional owners of Apple (AAPL). If you believe, as we do, that NFLX is as innovative and has the growth potential that AAPL had a decade ago, then you realize that the institutions have a ways to go before this stock becomes over loved.
Technically, NFLX shares have left the Nasdaq 100 and its peers in the dust as NFLX has returned 114% year-to-date compared to the Nasdaq 100’s 2% loss. The recent 30% pullback is a gift for investors who have been looking for a deal on NFLX stock.
And from our view, anything under $100 presents a prime buying opportunity for NFLX, as this leader won’t relinquish its position for some time.
Nvidia (NVDA) is a semiconductor company best known for its video technology, but NVDA serves other areas of the information technology market as well.
NVDA stock is up around 9% in the past year, besting the Nasdaq 100, which is only up a little more than 1%. NVDA’s performance and sentiment profile place it in the “1 percent” category, as NVDA stock is clearly climbing its own “Wall of Worry.”
NVDA shares have navigated this historic move in the markets by successfully testing its 200-day moving average in a dazzling show of technical strength. Another sign of NVDA stock’s strength is the fact that it remains above its 50-day trendline, which cannot be said for 90% of the Nasdaq 100.
Sentiment towards NVDA remains pessimistic as only 28% of the analyst community has the stock ranked a “buy,” and the short sellers have been increasing their bearish bets against the stock. Currently, the stock’s short interest ratio is approaching 8, making it one of the more heavily shorted names in the Nasdaq 100.
The clear Wall of Worry and technical strength indicates that NVDA is likely to lead the Powershares QQQ ETF (QQQ) higher into the end of the year and perform like a true “1 percent” stock.
Fiserv (FISV) provides electronic processing and various financial services to the market. Currently, FISV stock is trading 16% higher year-to-date and 28% higher on a 12-month basis, putting the FISV stock in the top performers within the Nasdaq 100.
FISV’s technical trends are among the strongest within their index, as its 50-day moving average is trending higher and its 200-day remains in place as support in the case of another market pullback, which we expect.
Like NVDA, sentiment towards FISV reveals that the stock is climbing the “Wall of Worry.” Analyst recommendations show that only 30% of the analysts rank it a “buy,” with the remaining 70% of the analyst with an opinion camping out in the “hold” camp.
Its only a matter of time (and higher prices) before the analysts holding out begin upgrading FISV, driving prices even higher.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.