5 Buying Opportunities Under $10 Up On A Down Day

Includes: BAC, FTR, RF, S, SIRI
by: David Alton Clark

The Gist

The market opened down and stayed as the rally that everyone hated turned into the sell-off that everyone expected. The Dow was down .95% registering a 128 point loss. The S&P 500 was down 9 points, posting a .62% loss, and the Nasdaq followed suit down 13 points or .43%.

The five stocks in this article caught my attention by displaying strong relative performance. These five stocks are stocks I am long or are on my watch list that actually posted gains Wednesday. 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.

The Goods

We will perform a brief review of the fundamental and technical state of each company. Additionally, we will discern if any upside potential exists based on sector, industry or company specific catalyst. The following table provided by Finviz.com depicts summary and performance statistics for the stocks for Wednesday.

Bank of America Corporation (NYSE:BAC)

I am long BAC. BAC is up 66% for the year, yet is still trading for approximately four fold below its 2007 high of $45 per share. The company is trading 9% below its 52-week high and has 2% potential upside based on a consensus mean target price of $9.45 for the company. BAC was trading Wednesday at $9.22, up slightly for the day.

Fundamentally, BAC has several positives. BAC insider ownership has increased by 66.39% over the past six months. The company has a forward P/E of 10.12. BAC is trading for 7.01 times free cash flow. BAC has a net profit margin of 11.62% and a PEG ratio of 1.4. BAC is trading for approximately 42% of book value. EPS next year is expected to rise by 89.58% and the company pays a dividend with a yield of .43%.

Technically, BAC looks good. The stock broke out of a descending triangle to the upside at the beginning of August. The coveted golden cross, where the 50-day sma crosses above the 200-day sma, was fulfilled earlier this year. I went long BAC at this time. I have found the golden cross to be a key metric in picking winners. The stock is holding just above the 20-day sma currently.

BAC is well positioned to take advantage of the resurgence in home sales. BAC has made significant progress in resolving its litigation risk. The risk/reward ratio on BAC at these levels is favorable to long trades. This is a long-term hold. There was no significant news out on BAC today. Maybe the saying no news is good news applies here. BAC is a steal at these levels. I'm staying long.

Frontier Communications Corporation (NYSE:FTR)

Frontier pays a dividend with a yield of 8.40%. The company is trading 15% below its 52-week high and has 4% upside potential based on the consensus mean target price of $5.11 for the company. Frontier was trading Wednesday for $4.90, up nearly 3% for the day.

Frontier has some fundamental positives. The company is trading for slightly over book value, 96% of sales and has a forward P/E of $18.15. The company's gross margin is 90.75%.

Technically, Frontier has been in an uptrend since May. The stock is up an amazing 20.81% over the last quarter. The golden cross was achieved at the beginning of September.

The big news was Frontier Communications has sped up broadband deployment to Oregon and the State of Washington. This is good news for the company and bodes well for future organic growth prospects.

I have been behind the stock since the $3 mark. The stock is a buy at this level. I see the recent pullback and bounce off the 50-day sma support line as a bullish event. The stock is a buying opportunity here.

Regions Financial Corp. (NYSE:RF)

Regions is up 76.40% this year. The company is still down approximately three-fold from its 2007 high of $32 per share. The company is trading 3% off its 52-week high and has 5% upside based on the analysts' mean target price of $7.95 for the company. Regions was trading Wednesday for $7.55, up nearly 2% for the day.

Fundamentally, Regions has many positives. Regions trades for 4 times free cash flow. The company has a forward P/E of 9.44. EPS is rising exponentially quarter over quarter. The company is trading for approximately three quarters of book value.

Technically, Regions looks great. The stock has been in a well-defined uptrend since June. The coveted golden cross, where the 50-day sma crosses above the 200-day sma, was achieved in late February. The rise has been orderly and the RSI is neutral at 58.

The only significant news today for Regions was the announcement it will partner with the Historically Black Colleges and Universities. This was not a big mover for the stock but may be part of the reason Regions was able to keep its head above water today. The organic growth generated from these initial partnerships could expand exponentially over time.

Regions was trading for $3.96 the day of my initial recommendation in May. Regions' positive catalysts are still in place and its technical and fundamental states are positive. Regions was a client of mine while I worked for Ernst & Young out of the Atlanta office in 1997. I reviewed their Y2K program. I was always impressed with their professionalism and conservative values. The stock is a buy here.

Sprint Nextel Corp. (NYSE:S)

Sprint is up 60% since my recommendation to buy the stock on July 17th. The company is trading 13% below its 52-week high and 2% above the analysts' mean target price of $5.15 for the company. Sprint was trading Wednesday for $5.04, up almost 2% for the day.

Fundamentally, Sprint has some positives. Sprint is trading for 1.64 times book value and only 44% of sales. EPS next year is expected to rise by 42%.

Technically, the stock has been in a solid uptrend for the last few months. The stock has been on a tear since mid-April. In mid-June, the stock fulfilled the coveted golden cross which is an extremely bullish technical feat. As you can see, this time the indicator was right on target.

As usual, I took profits too early. I always seem to sell my winners too soon and my losers too late. The recent pullback to the 50-day sma I see as a buying opportunity which was somewhat confirmed by the robust relative strength in the stock today.

Deutsche Telekom (OTCQX:DTEGY) last week announced a deal to merge its T-Mobile USA unit with MetroPCS (PCS). Bloomberg reported Wednesday that Sprint is holding off on a counterbid. Sprint is in no hurry. MetroPCS shareholders aren't expected to vote on the deal until year-end or early 2013. Regulators will review the deal as well.

Additionally, the company is down over threefold from its 2007 high of $22 per share. The stock is a buy now.


I am long SIRI. The company is trading at a new 52-week high and has 6% upside potential based on consensus mean target price of $2.91 for the company. SIRIUS was trading Friday for $2.75, up nearly 5% for the day.

Fundamentally, Sirius has several positives. Sirius has a forward P/E of 25 and trades for 27 times free cash flow. EPS is expected to rise by 28% over the next five years. Quarter over quarter EPS is up tremendously. Sirius's TTM ROE is 152% and the company's net profit margin is 107%.

Technically, the stock looks strong. The stock achieved the golden cross about two months ago. This indicator has proven to be extremely bullish. The stock has just made another 52-week high and recently broken above the long-term upper trend line.

Sirius popped the most in two months today after boosting its forecast for 2012 subscriber gains to 1.8 million from 1.6 million, helped by growth in auto sales. Sirius added 445,921 subscribers in the third quarter, bringing its total customer base to a record 23.4 million, the New York-based company said today in a statement.

Bank of America recently initiated coverage on SIRI with a Buy rating causing the stock to spike. As I stated in an earlier article, the recent news of strong car sales should keep the stock moving higher. I'm staying long. With profit margins and cash flow so high, I can't see how they would announce some type of stock buyback program or initiate a dividend. The stock is not capped, as some stated just a few days ago. (Sounded a little fishy to me in the first place). The first thing I thought when I heard SIRI was capped was somebody wants in.

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. All of the five stocks appear to be up for good reason and merit further due diligence. Don't take my word for it, do your own homework and decide for yourself. If you buy any stock, I suggest layering in to reduce risk and setting a trailing stop loss if you wish to minimize your downside even further.

Disclosure: I am long SIRI, BAC. 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 decisions.