- After a strong bounce, the stock market seems to be heading back into a correction.
- Investing pros are already eying the dip as a buying opportunity.
- Across Wall Street, traders are watching Nike, Home Depot, Amazon, and healthcare stocks.
April was a wild month on the stock market. The S&P 500 chalked up its best performance since 1975. For global stocks, it was the best month ever, period.
But now the rally is beginning to fade. According to one investment pro, this is the moment to pounce on stocks. Sean Taylor, chief investment officer at DWS told CNBC:
We would expect a short-term correction which would be a buying opportunity.
The question is, what stocks are they buying?
Loading up on tech during the stock market dip
Taylor is specifically looking at U.S. tech stocks. Technology has held up better than the broader market during this downturn. Some stocks, like Amazon, are up year to date, despite the market’s seismic shift lower.
AlphaOne Capital’s Dan Niles is also bullish on tech, and Amazon (NASDAQ: AMZN) in particular. But he’s waiting for the right moment. Niles sold Amazon stock just before last week’s earnings report, now he’s waiting for a better price to get back in.
We completely plan on buying it back… They’re a long term winner.
What about other tech stocks? Niles says he doesn’t like Apple, claiming it’s no longer a growth stock. But he is bullish on Apple suppliers like Qualcomm (NASDAQ: QCOM), which is poised to benefit from the 5G revolution.
Stocks with strong balance sheets
Chad Morganlander at Washington Crossing Advisors is looking for strong, defensive stocks that can weather a long recession. On a two-three year timeline, he likes Home Depot (NYSE: HD) and Nike (NYSE: NKE).
We’d be buying higher quality companies. The likes of Home Depot and Nike. Companies that don’t have a lot of debt on their balance sheet and have a tremendous amount of predictable free cashflow that goes out into year three and four.
He is particularly bullish on Nike’s shift to online, direct-to-consumer strategy. He thinks it will help them even if consumers stay at home.
Planning for the stock market recovery
Pro investors are starting to pick out those stocks that will bounce back fast when the coronavirus blows over. Analysts at Ray James pointed out that industrials will come back way before consumers. Among their picks are Masco Corp. (NYSE: MAS) which makes building products.
Bank of America told clients to buy brands with a strong presence in Asia, where consumers should come back faster. They highlight Ralph Lauren (NYSE: RL) as one such retailer.
The healthcare stocks
No surprise to see pro investors eying up healthcare and insurance stocks during the pandemic. Raymond James picks out Amgen (NASDAQ: AMGN) as a strong candidate. The company has a potential Covid-19 drug going into trial in the coming weeks.
Openheimer analyst Michael Wiederhorn sees an opportunity in the health insurance sector, singling out Humana (NYSE: HUM)as a ‘buy’ stock.
Beaten up stocks
For those willing to take a bigger risk with perhaps a longer-term horizon, there’s always the beaten down stocks. Stiefel analyst Joseph DiNardi picks out Southwest Airlines (NYSE: LUV) as a possible option. The stock has underperformed its rivals at Delta and Jet Blue.
Having said that, Warren Buffett just dumped all his airline stocks, including Southwest. So you might need a high risk-appetite for this one.
- Home Depot
- Masco Corp.
- Ralph Lauren
- Southwest Airlines
Disclaimer: The opinions in this article do not represent investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.