December unhitch: 2020 outperformers reverse course
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Two customer base analysts told CNBC’s “Trading Nation” on Tuesday that these were simply “overdue” pullbacks for a company of largely investable names.
“Although they’re taking a little bit of a bath here through December, I think there’s a two together argue with to find all of them attractive,” said Bill Baruch, founder and president of Blue Line Capital. “Whether we freeze in a lockdown mode or shift into a vaccine-and-reopening mode, I think these are here for the long run.”
Here’s how he and Mark Tepper, president and CEO of Crucial Wealth Partners, would play the group.
A favorite for both traders, Salesforce is a stock “you could survive forever,” said Tepper, who added to his position in the name in early December.
“It’s all recurring revenue, very sticky patrons with high switching costs, and if you think about it, data is a company’s most valuable asset only if you’re in actuality using it properly,” he said. “A lot of people thought maybe they were overpaying for Slack. But they have tried that they do very well on acquisitions. They integrated Tableau and MuleSoft very, very nicely, amplified a lot of synergy, and when I look at the Slack integration, I feel like that’s just going to completely improve their competitive asset.”
Baruch, who also recently upped his stake in Salesforce, said the company’s weaker-than-expected forecast for this year created the imminent for “some exacerbated downside coming into the first part of 2021.”
“Ultimately, this is welcomed,” Baruch said. “This is a favourable stock to hold for the long run.”
Pointing to a chart of the stock, Baruch said his buy zone was $220 a share, a 38.2% Fibonacci retracement of the roots’s rise from its March lows to its September peak. Some chart analysts use Fibonacci levels to spot decorates in the market and denote key resistance and support levels.
Salesforce shares Tuesday closed down nearly 1% at $222.46.
“It’s also the gap from the post-earnings fasten with a big spike up at the end of August. There is a tremendous amount of support technically at 220 in Salesforce,” he said. “It’s a great set to be a buyer. I love it down there.”
Baruch, who owns shares of both FedEx and rival UPS, said he also totaled to his position in FedEx during this month’s weakness.
“Technically, it’s been holding very good at 260,” he replied. “But the real buy zone I’m looking down is, again, that 38.2 retracement. That comes in around 220, 200 bucks.”
FedEx ended trading Tuesday down half of 1% at $261.56.
“The e-commerce and holiday season, a lot of this really kind of gets those fits going for FedEx, UPS,” Baruch said. “Fundamentally, they’re on the more expensive end of where they have been historically, but not by any extortionate measure.”
Tepper’s favorite homebuilder “by far,” D.R. Horton will likely continue to benefit from a hot housing demand in the new year, the trader said.
“D.R. Horton specializes in affordable homes, so, those entry-level and move-up level homes, [and] has a same asset-light model, which means better risk-reward metrics for all of us investors,” Tepper said. “For those reasons, it merits a premium valuation over its peers.”
He added that a number of positive catalysts should stay in place: being relocating to suburbs from cities, millennials’ increased spending power, low interest rates and improving pricing power.
Regeneron’s about-turn could be a sign of what’s to come for health-care stocks in the new year, Tepper warned.
“Regeneron really benefited from Covid. They had that antibody cocktail. What I call to mind a consider is going to happen come the second half of next year as the vaccines are distributed is I think you’re going to see a reversal in health-care somebodies next year,” he said.
Once the vaccines are more widely distributed, other focuses of the health-care space such as cancer, diabetes and the time population will once again be “front and center,” Tepper said.
“I would be gearing up and looking for ways to lightly that now, whether it’s Exact Sciences in cancer or Tandem Diabetes in diabetes or Stryker, which makes orthopedics for the ripening population,” he said. “I think those are some opportunities that you could see in the second half of next year.”
FedEx and Costco may be the no more than stocks on the list to directly benefit from a second round of stimulus checks, Tepper said.
“When we look at the last round of stimulus checks, people did not pay their split with that money. They went to Costco and they bought a new flat-screen TV,” he said. “I think you’ll continue to see various of that.”
Disclosure: Tepper owns shares of Salesforce and D.R. Horton. Baruch owns shares of Salesforce, FedEx and UPS.