The Dow index plunged over 300 points on Friday. Most stocks have posted significant losses in the month of August and might now be at or close to a bottom. Most likely the market will continue to be driven up or down by the events in Europe. If Greece defaults and a major European bank collapses, it could have a contagion effect on the rest of Europe and the world. I don't think it makes sense to take a big new position in any stock unless some meaningful resolution appears for Europe or if the markets decline in total capitulation. However, stocks that are able to decouple from the market madness and go up, might be good for short term trading opportunities. A stock that shows strength at this point might just be having a good day, but it can also be a sign that the stock has bottomed out and wants to rise. If a stock can go up when markets plunge it might be even stronger when markets are less negative.
Here are a few stocks worth watching for further gains based on recent strength:
Best Buy (NYSE:BBY) shares are trading at $24.50. Best Buy is a leading retailer of electronics and is based in Minnesota. The 50-day moving average is $27.06 and the 200-day moving average is $31.32. Earnings estimates for BBY are about $3.48 per share in 2011 and $3.70 for 2012 so the PE ratio is only about 8. The book value is stated at $15.23. Best Buy pays a dividend of 64 cents per share which is equivalent to a yield of 2.6%. The business model has challenges as Amazon.com (NASDAQ:AMZN) and other online retailers continues to compete with Best Buy. However, the stock looks cheap, it pays a solid dividend and it may have found a bottom. BBY shares were up 30 cents on Friday.
Gap, Inc. (NYSE:GPS) shares are trading at $16. The Gap operates a chain of specialty retail clothing stores. These shares have traded in a range between $15.08 to $23.73 in the past 52 weeks. The 50-day moving average is $17.54 and the 200-day moving average is $20.12. Earnings estimates for GPS are $1.46 per share in 2011 and $1.70 for 2012, so the PE ratio is about 9 on these shares. GPS pays a dividend of 45 cents per share which is equivalent to a 2.8% yield. If the economy slips into recession, more consumers might shop at value oriented retailers like The Gap. GPS shares were nearly unchanged on Friday, even though the market dropped over 300 points.
Micron Technology (NASDAQ:MU) is trading at $6.35. These shares have a 52 week range of $5.18 and $11.95. The 50-day moving average is $6.68 and the 200-day moving average is $9.02. Estimates for MU are about 33 cents per share in 2011 and 60 cents for 2012. Book value is stated at $8.45 per share. This stock is trading at nearly half of the 52 week high and appears to have started rebounding from recent lows. On Friday, MU shares were up about 1.7% or 11 cents.
Dendreon Corporation (NASDAQ:DNDN) is trading around $11.40. Dendreon is a biotechnology company, based in Washington. These shares have traded in a range between $9.22 to $43.96 in the last 52 weeks. The 50-day moving average is $24.65 and the 200-day moving average is $34. This stock dropped off a cliff a couple weeks ago when Dendreon announced financial results which indicated slower than expected sales for Provenge. More recently, the company announced plans to restructure the company and the stock reacted favorably on Friday by jumping almost 5% or 52 cents at the close.
Novellus Systems, Inc. (NASDAQ:NVLS-OLD) is trading at $28.12. These shares have a 52 week range of $23.11 and $41.82. The 50-day moving average is $30.38 and the 200-day moving average is $33.99. Estimates for NVLS are about $3.24 per share in 2011 and $3.27 for 2012. Book value is stated at $15.29 per share. With these shares trading at about 8.5 times 2011 earnings, it looks like a solid value. This stock was trading around $38 in May and may have bottomed out. It was able to rise 37 cents on Friday as the Dow index plunged.
The data is sourced from Yahoo Finance and Insidercow.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.