Some trades that target the pullbacks
David Russell | [email protected]
As usual, we're looking for companies that have pulled back recently but have moving averages that are lining up bullishly. (For more on how to use the screener, see this article; to jump straight to my current results, follow this link.) Please treat these as starting points, not outright recommendations.
HCA (HCA): This hospital operator jolted higher after the Supreme Court upheld Obamacare because the law is expected to reduce the industry's problem with unpaid medical bills. It's now pulled back to previous resistance around $28 and appears to have much more upside potential than downside risk. The next earnings date hasn't been announced, but last year it was on July 25. The last two reports beat estimates.
Builders FirstSource (BLDR): A relatively new name in the housing space, BLDR supplies materials such as siding, garage doors and insulation. They have been taking market share from local, independent companies and are organized to compete on a national level. Earnings beat estimates the last two quarters and the next release comes out on July 20.
Glu Mobile (GLUU): This maker of mobile-phone games is up about 8 percent since our mention almost two months ago. Last week it was up even more than that but has now pulled back and looks pretty interesting down here around $5. It might go a little lower, but the long-term trend looks quite attractive. Earnings have beaten estimates the last three quarters and short interest is elevated at more than one-quarter of the float. The next set of numbers will probably arrive in early August but the timing hasn't yet been announced.
Boston Beer (SAM): This brewer, best known for its Samuel Adams brand, has beaten estimates for at least the last three quarters. It ripped to an all-time high over $120 earlier this month before a UBS downgrade knocked it lower. But the story hasn't changed, and it looks interesting on this pullback. Earnings will likely be released in early August.
I also want to briefly mention the financials, which have become engulfed in a scandal surrounding Libor since I recommended them two weeks ago. In my view, this development doesn't threaten the larger bullish story in the sector, which is based on their low price-to-book ratios and an improving credit cycle. Yes, some municipalities and borrowers may sue the banks, but you can be sure that the lenders are well insulated behind a wall of fine print. Trading has been especially bullish in JP Morgan and Citigroup this week.
Disclosure: I own HCA shares.
(A version of this article appeared in optionMONSTER's What's the Trade? newsletter of July 11.)