Trader Pete Najarian saw a big technology chance to buy, he purchased Netflix stock because he believes the streaming giant is trading at a bargain compared to rival Disney.
Netflix has “been on hold for the entire year.” But I do believe this is a stock with a lot of upside potential,” the co-founder of MarketRebellion.com where he is a regular panelist.
“I don’t usually look for stocks until I see significant market sell-offs, and [Netflix] is a stock where we have seen a lot of call buying in the last week or so. “Monstrous call buying,” Najarian said as the Dow Jones Industrial Average fell about 900 points, or more than 2.5 percent, and the broad SP 500 fell about 2%. The Dow fell 725.81 points, or 2.1 percent, while the SP fell 1.6 percent.
Netflix was trading at nearly $560 per share just a few days ago, according to Najarian. It is now trading around $530 per share on Monday. Year to date, the stock is down about 2%.
“I thought it was a great opportunity to buy the stock and then use the current high implied volatility to sell options against it, so that’s exactly what I did. This stock appeals to me. “I believe there are opportunities,” Najarian said, expressing optimism about international growth prospects and forays into fields such as video gaming. He also praised Netflix co-founder and CEO Reed Hastings for expertly steering the company to remain innovative over the years.
Netflix is set to release quarterly earnings after the market closes on Tuesday, and Najarian said he’ll be watching with bated breath.
“We may have a quarter that they report that gets sold off a little bit. In that case, I may be willing to buy a little more if the sell-off is for the right reasons, and we’ll see,” he said. “It depends on what they say in their earnings report,” says the investor, “but I like this company.”
Best Volatility stocks
Defensive stocks are those that tend to be stable regardless of how the market performs overall. Utilities, health care, and consumer staples are typically classified as defensive sectors by market strategists.
Even before Monday’s stock market crash, defensive sectors had recently outperformed the broader market. The Health Care and Consumer Staples Select Sector SPDR Funds have gained nearly 1% for the month, while the Utilities Select Sector SPDR Fund has gained more than 3%.
Analysts identified stocks in the utilities, health care, and consumer staples sectors that have at least 70% of Wall Street analysts recommending a buy. We screened that group for names that are expected to gain at least 5% in the next 12 months.
Morgan Stanley added the snack company to its new money buy list on Monday, calling it a “defensive play with strong growth visibility.”
In a note, Morgan Stanley’s Michael Wilson said, “Consumer Staples are the epitome of boring, but boring can be beautiful if the broader market begins to falter.”
Two utilities stocks also appear on analysts’s list of preferred defensive stocks. AES Corporation and Entergy Corporation are both trailing the market this year, but Entergy is outperforming the SP 500 in July.
The majority of the stocks on our screen are in the health care sector. On analysts’s list, IQVIA, a health care technology company, has the highest proportion of buy ratings, with 86 percent of analysts saying the stock is a buy.
Cigna Corporation has the most upside potential of the names on analysts’s screen. Its average 12-month price target is 27.9% higher than its Friday closing price.
UnitedHealth Group, Thermo Fisher Scientific, and Anthem are among the other healthcare companies on our list.
Earning reports are coming
Data from Bespoke Investment Group to identify stocks reporting earnings in the coming week that frequently underperform Wall Street expectations and trade lower following their announcements.
Historically, the stocks listed below outperform earnings per share expectations less than 60% of the time and fall by 1% or more the following session. In addition, the companies rarely, if ever, raise their forward guidance.
On average, two of the stocks in this screen have experienced particularly large declines.
Clearfield, a fiber optic company, has missed earnings expectations more than half of the time, with a 4.2 percent average decline. Del Taco, which has beaten expectations less than a quarter of the time, has a 3.6 percent average drop.
Clearfield has been a big winner year to date, rising nearly 40%, which may cause investors to want to take profits after a disappointing report. Del Taco shares, on the other hand, are only slightly positive in 2021.
Another notable name on the list is Las Vegas Sands, which is entering earnings season on a downward trend. The stock fell sharply in the second quarter and is now down roughly 20% in the last three months.
The list also includes a number of small and regional financial firms, which account for a sizable portion of this week’s earnings report. According to Bespoke’s data, First Midwest Bancorp stands out among the group for missing earnings less than one-third of the time.