The market wiped out Friday's gains based on news of an Italian election fiasco to end the session down big. The Dow was down 1.55% registering a 216 point loss. The S&P 500 was down 27 points, posting a 1.83% loss and the Nasdaq followed suit, down 46 points or 1.44%.
The reality is Europe has a serious growth problem. The liquidity question may have been resolved, now the concern is solvency. I believe this is why the markets failed to hold early gains when participants heard the Italian election results did not favor the austerity candidate.
The five stocks in this article caught my attention by displaying strong relative performance. These five stocks are a few of the top performing stocks for Monday and actually posted gains. This can often be a sign these specific stocks are poised to move higher. On down days, I identify the stocks in the green and take a closer look to see if there is good reason for the strength in the stock.
We will perform a review of the fundamental and technical state of each company. Furthermore, we will attempt to discern if any upside potential exists based on a sector, industry or company specific catalyst. The following table depicts summary and performance statistics for the stocks for Monday.
Amgen Inc. Inc. (AMGN)
The company is trading 1% below its 52-week high and has 5% upside potential based on the consensus mean target price of $94.40 for the company. Amgen Inc. was trading Monday for $89.55, up over 3% for the day.
Fundamentally, Amgen Inc. has some positives. Amgen Inc. pays a dividend with a yield of approximately 2.17%. The company has a forward P/E of 10.61. The company has a net profit margin of 25.17%. The company has a PEG ratio of 1.60 and $31 of cash per share.
Technically, Amgen Inc. has just broken through long-term resistance at the $90 mark. The stock looks technically bullish and has a beta of .40.
Amgen's stock rose Monday after news hit that Affymax's new anemia drug Omontys was recalled because of safety problems. Omontys is a drug that competes with Amgen's anemia treatment Aranesp and Epogen. The news may herald a more cautious stance regarding the approval of new anemia drugs by the FDA, which favors Amgen in the long run. I like the stock, yet would wait for the stock to cool off for a few days prior to starting a position.
BlackBerry Inc. (BBRY)
The company is trading 28% below its 52-week high, yet 18% above the consensus mean target price of $10.90 for the company. BlackBerry was trading Monday for $13.25, up slightly for the day.
Fundamentally, BBRY has some positives. The company's net profit margin is negative, but improving quarter over quarter. The company trades for 8 times free cash flow and 73% of book value.
Technically, BBRY has been in a long-term uptrend since hitting a low of $6 in late September. The stock is currently trading at the very bottom of the uptrend channel. This is precisely the time to start a position. I am long BBRY.
BBRY's BlackBerry Z10 may be too little too late with the fierce competition it's up against. Nevertheless, now is the time to buy this stock. With the launch of the BlackBerry Z10, I posit the numbers will impress. The stock should be in for a run as the loyal BBRY subscribers upgrade their devices.
McDonald's Corp. (MCD)
The company is trading 2% below its 52-week high and has 4% upside potential based on the consensus mean target price of $100.05 for the company. MCD was trading Monday for $96.14, up almost 1% for the day.
Fundamentally, MCD has some positives. The company's net profit margin is 20% and improving. The company pays a dividend yielding 3%. EPS and sales are improving quarter over quarter.
Technically, MCD has been in a long-term uptrend since hitting a low of $83 in mid-November 2012. The stock achieved the golden cross recently and is trading above all three major moving averages. These are bullish developments.
MCD is the best in class of their industry. MCD has sets the trends in regards to menu choice. Their management team has a plan for organic growth while delivering a solid dividend. With this stock you get the opportunity of both income and capital appreciation. I like the stock here.
Staples, Inc. (SPLS)
The company is trading 18% below its 52-week high and has 4% upside potential based on the consensus mean target price of $14.06 for the company. SPLS was trading Monday for $13.54, up over 2% for the day.
Fundamentally, SPLS has some positives. The company pays a dividend yielding 3.5%. EPS is up 15% this year. The stock trades for 12 times free cash flow and 1.5 times book value.
Technically, SPLS has been in a long-term uptrend since hitting a low of $10.50 in late August 2012. The stock achieved the golden cross recently and is trading above all three major moving averages. These are bullish developments.
Staples is the industry leader with over 2000 stores. The rumor mill has it that Office Max (NYSE:OMX) and Office Depot (NASDAQ:ODP), two of its competitors, are considering a merger. This has caused Staples' stock to rise. Staples is a solid stock that pays a good dividend. Nonetheless, I do not like the reason behind the strength in the stock. I'm not a buyer here.
Verizon Communications Inc. (VZ)
The company is trading 4% below its 52-week high and has 3% upside potential based on the consensus mean target price of $47.19 for the company. Verizon was trading Monday for $45.72, up nearly 1% for the day.
Fundamentally, Verizon has some positives. Verizon pays a dividend with a yield of 4.51%. The company has a forward P/E of 14.56. The company has a net profit margin of 9.11%. The company is trading for 21 times free cash flow.
Technically, Verizon has just broken through long-term resistance. The stock has been hugging the 200 day SMA. The stock has an RSI of 72. This is considered overbought.
Verizon is well positioned for the telecom revolution. With the proliferation of mobile devices discussed in the AT&T section above, Verizon stands to grow profits substantially. The stock just broke out above long-term resistance. The risk/reward is favorable at this level, yet I would wait for the RSI to fall below 70 prior to starting a position.
The Bottom Line
Down days are good for identifying prospective investing opportunities. It makes it slightly easier to find the needles in the haystack, so to say. Four of the five stocks appear to be up for good reason and merit further due diligence. I would avoid Staples until signs of a turnaround in the fundamentals emerge. There are better prospects to choose from currently.
Use this information as a starting point for your own due diligence and research methods before determining whether or not to buy or sell a security. If you choose to start a position in any stock, I suggest layering to reduce risk. Furthermore, always maintain a well-balanced diversified portfolio.
Disclosure: I am long BBRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This is not an endorsement to buy or sell securities. Investing in securities carries with it very high risks. The information contained within this article for informational purposes only and is subject to change at any time. Do your own due diligence and consult with a licensed professional before making any investment.