Recently, I was asked what some of my favorite stocks in this current market are. Below is a list of 4 of my favorites with some reasons why. As a trader, I am interested in BIG moves. The 4 stocks below are ones with big move potential with smaller than normal market risk at this time due to the dramatic selling that has already taken place. Feel free to put these on a watchlist and trade them with your signals.
1. FCX- Freeport McMoran
This company stands to benefit from lowered interest rates around the globe and especially in Australia. They are one of the world’s leading copper producers and have a strong correlation with global markets. As demand has weakened out of China for copper and other commodities, the stock has been hit hard. The recent rates cuts and lowering of bank reserve requirements have the potential of kick starting demand in China again. Even if China demand doesn’t increase, has copper production really decreased by 75% in the past 12 weeks like the stock reflects? I sense some panic selling and margin calls. The strong volume building around the $40 price level could prove to be a nice bottom. It also helps that the stock is trading at a 5 multiple.
2. C – Citigroup
Many reasons to avoid this stock. Earnings next week should give a clearer picture of what is happening with them, but I can’t help but suspect that all this money being thrown at Wall St won’t end up in Citigroup’s hands. Strong volume tends to enter the stock around the 13-14 price level. The stock is trading $12 below book value which is unheard of. This means that if more write downs come, most of them are priced in already. Oh yeah…have I mentioned that huge quantities of petrodollars from the Middle East are at work in Citigroup.
3. EXM – Excel Maritime
This stock is in a classic force selling mode. I suspect we will learn in the weeks to come that large hedge funds received margins calls forcing them to liquidate the stock. It is trading at a multiple of 1.4 with a dividend yield of 10%. The price of the stock has fallen from 60 to 10 on global economic worries. I suspect a strong overreaction occurred on the selling side and that the strong dividend and low multiple will attract some panic buying as people rush into some of the highest quality stocks.
4. PG – Proctor and Gamble
PG is the largest consumer staples company in the world. The stock dropped $12 this week on what? Fear that people will buy less soap, detergent, or shampoo? The economy is in recession mode and as long as that continues, safe money will want PG. I look at this week’s sell off as a great opportunity to pick up a safe stock with a fantastic management team at a huge discount. Did I mention that their products are in 180 different countries so for those of you out there who believe the global growth story isn’t dead, PG is the place to be.
Happy Trades,
Jeff
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