Bed Bath & Beyond (NASDAQ: BBBY)
Investors can feel comfortable again buying Bed Bath & Beyond now that according to Bank of America Reddit traders seem to have left the stock behind.
BBBY shares are now trading much closer to pre-surge levels, and non-fundamentals drivers like the number of mentions on retail investor online message boards, trading volumes, and short interest have moderated,” according to the note.
According to Bank of America, the recent spike in volatility has not changed the stock’s long-term story.
“We continue to see a solid LT turnaround in place,” according to the note.
Bank of America has reinstated its price target for Bed Bath & Beyond at $38 per share, nearly 20% higher than the stock’s closing price on Wednesday.
Bed Bath & Beyond rose as high as $44.51 per share during the meme stock rally earlier this month.
Some technological stocks — even with the high valuations of this field — still have a chance, but only if investors wait for a “significant dip” one investment chief said.
Despite the shift in focus to so-called “value” stocks, CIO Fahad Kamal of private bank Kleinwort Hambros named his favorite Big Tech stocks to buy when the price is right.
Investors believe that value stocks are undervalued and that they will benefit from the economic recovery following the pandemic. Growth stocks, on the other hand, include major technology stocks and are defined as companies with revenues and earnings that are expected to grow faster than the rest of the market. They can, however, be riskier and more volatile.
The technology-focused Nasdaq index in the United States reached new highs this year, but has also experienced some sharp drops since the beginning of 2021. The Nasdaq dropped nearly 2% last week.
In an interview with “Squawk Box Europe” on Friday, Kamal highlighted a key group of technology stocks that he believes would be best to buy if the market fell.
He stated that the “big five” — Facebook, Apple, Amazon, Netflix, and Google, also known as the FAANGs — were still “incredible companies.” He emphasized that despite being in “record positions,” they each reported strong earnings in the first quarter of 2021.
For example, Facebook reported a 94 percent increase in net income to $9.5 billion in the first quarter, while Apple reported its best-ever quarterly revenue of $111.4 billion in the first three months of fiscal 2021.
“I mean, it’s incredible, these are still incredible companies, and they will undoubtedly set the tone for markets for the foreseeable future,” Kamal said.
He admitted that they still appeared to be expensive when compared to other stocks, but urged investors to look for an entry point in a “significant dip” to buy into these companies.
However, not everyone is convinced. Trivariate Research founder Adam Parker warned that some big tech stocks are high risk and should be treated with caution. Apple made Trivariate’s list of the riskiest stocks, with the most negative correlation to inflation, according to the research firm.
Kleinwort Hambros has had a “long-standing overweight” position in “growth” stocks, particularly technology firms, for the last five or six years, according to Kamal.
Recently, he stated that his firm had reduced its exposure to a more “neutral” position in the sector and had invested more in “pro-cyclical regions.” These are investments that are expected to rise and fall in tandem with the business cycle.
However, Kamal stressed that this did not imply that his firm had sold out of its investments in the technology space, but rather that it had “re-positioned slightly because we believe there is still catch-up for the value trade.”
Stocks to sell
According to investment company Piper Sandler, rising inflation will keep dollar tree shares pinned down over the coming year.
“Our downgrade is primarily motivated by concerns about intensifying inflationary pressures from both freight and wages, as well as core-inability DLTR’s to pass through price increases – given its fixed $1-only price point,” the note stated.
Dollar Tree’s margins have been flat or narrowing in recent years, according to Piper Sandler, and higher wages should exacerbate the problem.
“In terms of wages, low-income wage growth and total wage growth are at their highest levels since DLTR’s initial public offering in 1995. Meanwhile, the overall retail job quit rate is at a more than 20-year high. “We estimate that a $1/hour pay increase for store associates would result in a $215M headwind,” according to the note.
Piper Sandler reduced its price target for Dollar Tree from $117 to $102 per share, implying virtually no upside for the stock.
The stock of the discount retailer has struggled this year, falling 8% in the last three months and remaining below pre-pandemic levels.