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- The S&P 500 index is down more than 6% since peaking in early September.
- A two-day rebound in the index is encouraging for all stocks.
- Alphabet’s stock in particular looks attractive at current levels.
The S&P 500 index is down more than 6% from its record high in September but a handful of notable names have performed much worse. Should investors be buyers of the weakness? These two pros discuss on CNBC’s “Trading Nation.”
Encouraging Rebound
The S&P 500 index closed higher on Monday by more than 1% and this is “marginal good news” for all stocks, Laffer Tengler Investments’ Nancy Tengler said on “Trading Nation.” The rebound follows a pretty material selloff over the past few weeks and it is encouraging fund managers and investors are confident enough for a “bargain hunt.”
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Technology stocks, in particular, are attractive over the medium-term as tech usage among individuals and companies are unlikely to change in a post-COVID reality, she also said. But investors need to focus on “growth at a reasonable price” instead of “growth at any price.”
Looking forward, the rebound in the S&P 500 should continue through the end of the year, regardless of the outcome of the presidential election. The major catalyst to help lift stocks higher is a lagging effect of potential new stimulus measures that are set to be introduced.
Alphabet trading at a reasonable valuation
One example of a tech stock that is trading at a reasonable price is Alphabet Inc (NASDAQ: GOOG), she said. The stock is down more than 10% since peaking in early September and is looking attractive on a valuation basis.
The company is expected to show an earnings growth of around 20% in 2021 and then again in 2022 but shares trading at a mid-20s multiple.
The fundamental case for Alphabet
The Google parent company is one of the names New Street Advisors’ Delano Saporu wants to buy.
He explained on “Trading Nation” that Alphabet should benefit from a rebound in ad spend as companies are starting to re-allocate capital to their advertising budget. Alphabet is also battling fiercely in the fast-growing cloud segment and any market share gains will be viewed favorably by investors.
“I think they can make headway in that space,” Saporu added.
Also, YouTube represents an overlooked catalyst as the streaming video platform is improving its ability to better target users.
By contrast, other beaten up names that are associated with travel and leisure like Wynn Resorts, Limited (NASDAQ: WYNN) have yet to demonstrate good trends for investors. Shares of the casino operator are down nearly 15% since its peak.
Some of the other beaten up stocks highlighted on “Trading Nation” include oil field services company Halliburton Company (NYSE: HAL) that is down 21.5%, bank Citigroup (NYSE: C) is down 15%, and food company Kraft Heinz Co (NASDAQ: KHC) is down more than 12%.
