In a market that has lost more than 6.50% of its value in the last month, last Friday gave us a glimmer of hope. Investors are frightened that history will repeat itself and that the market will reflect last year's loss. The stage has been set and politicians will once again attempt to agree on what's best for our country, so that we don't go off the fiscal cliff.
On Friday the language used by politicians was encouraging and who knows, maybe since the election is over they can all agree on what's best for the country and will not be so preoccupied with antics that benefit each respective party. With that being said, a lot of uncertainty remains. However, the market has fallen lower and what appears to be value is spread throughout the market.
In this piece I am looking at five stocks that might be presenting value and are priced at crucial levels that are worth monitoring over the next week. Each of these stocks could trade either way but still present long-term upside because of fundamental growth and upcoming catalysts. If these stocks can surpass resistance or break downward trends then it could be a great sign in the weeks ahead and a solid provider of gains in an uncertain market.
Let's start with a bang and look at Apple (AAPL). The country's most valuable company saw its stock reach a low of $505.75 on Friday, which are pennies shy of being a $200 loss from its high back in September. Apple is by far the most held stock among institutional funds and these funds are scrambling to sell shares before the end of the year to minimize loss and maximize investor confidence.
At the same time as some are running for the doors, others are buying and everyone is trying to call its bottom. Every week the stock seems to fall below presumed support and with $500 being a crucial psychological level of support, it will be very interesting to see how Apple responds.
Looking ahead this is still a company expected to grow more than 25% in the next year, trading with a forward ratio of just 9.05. Prior to September 20, AAPL had posted YTD gains of more than 75% but those gains have been reduced to just 30%. With next week being short and the much anticipated holiday shopping season ahead, it seems logical that Apple's fall will reverse in short time, especially considering the strength of its current quarter. The reason Apple is a watch is because it is close to $500 and recovered to close over $525 on Friday, which is yet another price that some have suggested is a support. If the stock can maintain or trade higher in the coming week, then perhaps look for a reversal but if not, then rest assured that it will eventually rise due to strong sales and holiday momentum. The bottom line is that with strong growth and an undervalued price, Apple will eventually find a bottom and it just might be now.
Facebook (FB) did exactly what so many expected it not to do, it traded higher on the day of its 777 million share lockup expiration. The stock had traded lower during every lockup expiration in the past; but the funny thing about the stock market is that once everyone expects something to happen, the reverse usually occurs. After a very strong quarterly report, my feelings are that investors were scared to death of buying before the 777 million share lockup expiration. However, now with the lockup being a concern of the past and the company showing near-term promise, it is likely that Facebook trades considerably higher.
The key to watch in regards to Facebook is its price action between $23 and $24. In the last three months, Facebook has seen this price on three occasions but has always sold off, below $20, in the past. The stock had hit $24 three weeks ago but quickly sold off as investors braced for the lockup. However, with the stock trading at 36.81x next year's earnings, which is very cheap for a social media stock, combined with the company finally returning profits with effective advertising on mobile and offering new services such as promoted feeds and Gifts, this is a stock that could rally significantly higher. Yet because of its recent history of falling once reaching $24, I'd wait until the stock is $25, just to make certain that the trend has been broken if you don't already own shares.
Speaking of trends, Arena Pharmaceuticals (ARNA) is one of the trendiest stocks in the market. It acts almost like a yo-yo, trading between $8 and $9.30 on a monthly basis. It's because of the Vivus' (VVUS) slower than expected sales growth that shares of Arena have been driven lower. Some investors now expect trouble when Arena's product finally hits the market. But here's the thing, Arena will not be presented with the same problems as Vivus. Arena's product is safe and the company will have a much more flexible marketing strategy, which might be most important, as Vivus' product is only available through a mail-order pharmacy. Although Arena does not face these problems and is poised to enter this massive space as an innovating drug, the stock has traded with Vivus. Therefore, as the company's launch approaches, watch for momentum in its stock. Right now it is a good trade, from $8 to $9, therefore at $8.50 it is right in the middle. With it being in the middle, investors should take notice and view its price as a potential opportunity or a good entry point. Because eventually it will break the range, one way or the other and I'm betting on the trend higher.
Lions Gate Entertainment (LGF) has rallied over 85% in 2012 thanks to big name movie releases but strangely pulled back last week by nearly 7% despite one of the biggest releases in its history. The final Twilight movie of the franchise is expected to top $150 million in its opening weekend, following exceptional record breaking numbers for its opening day. As a result, analysts are projecting further gains from the stock, as the company continues to see large sales from The Hunger Games video and is gearing up for a sequel and further negotiations for additional Twilight films to add to the franchise. Therefore, I am very surprised that the stock didn't trade with the same level of excitement as it did during the week prior to the opening of The Hunger Games. However, with it posting two consecutive days of gains in the final two days of last week and Twilight having a very good chance at exceeding expectations, I would watch this stock for a potential rally this week, as it could very easily trade to new highs if sales exceed expectations.
BB&T Corporation (BBT) might just be the best regional bank in the country, with explosive growth, a near perfect balance sheet and an investor friendly executive staff. Last quarter the company grew its top line 18.60% and its bottom line by 35%, representing efficiency and growth in a near flat banking sector. However, the stock has since fallen lower, nearly 20% since the first week of October and is trading at just 9.57x next year's earnings as the company failed to meet quarterly expectations. The good news is that last week it posted its first week of gains, with a 1.78% return. A gain of less than 2% might sound minimal but keep in mind that the market lost nearly 1.5% of its value and financials tend to trade with a higher beta. Therefore, it is very possible that BBT has found a bottom and if it can trade higher next week, then it might continue to soar, making it a stock to keep your eye on.