It’s just days until Christmas, and in the spirit of the holiday two traders analyzed a few potential stocking stuffers: Stocks that trade for less than $25 a share that have outperformed this quarter.
Some of those names include General Electric, Under Armour, American Airlines, Hewlett Packard Enterprises and retailer Gap.
Mark Tepper, president of Strategic Wealth Partners, said most of those stocks look more like lumps of coal than gifts.
“It’s tough to get excited about a lot of these,” Tepper told CNBC’s “Trading Nation” on Tuesday. “When it comes to GE, I look at GE as a company with an identity crisis. They have no idea who they want to be, what they want to do, so it’s not something I want to own.”
As for American Airlines, he said he’d prefer what he sees as the better-managed Delta. Hewlett Packard has benefited from a pull forward in computer sales that will slow down, he said, and Gap has struggled with sales at some of its franchises, including Banana Republic.
There is one stock on the list he sees as one to watch, though.
“The only one where I think there’s some potential is Under Armor, and that’s really because I love the end market. I love athleisure, I love athletics,” said Tepper. “It is the turnaround story in a very attractive end market, but they’ve had their issues.”
Before Tepper can jump in, he said, he needs to see a commitment to innovation at the company as well as more stability in management. The stock is down 20% this year.
Katie Stockton, founder of Fairlead Strategies, said all five names have the potential for long-term turnarounds. However, she said she fears the first quarter could prove difficult for these quarterly high flyers.
“These names are very strongly off of their lows. Of course, the names are long-term laggards, but they’re unlikely to outperform in the near term given that January effect, which does tend to favor stocks that actually lagged all the way through mid-December,” Stockton said during the same “Trading Nation” segment.
GE has rallied 73% this quarter, Under Armour 52%, American Airlines 30%, Hewlett Packard Enterprises 25% and Gap 19%. Those gains put them at risk of underperformance in January as investors rotate out of the winners and into stocks that had weak performances in December, said Stockton.
From a technical perspective, though, these stocks are building out multiyear turnarounds.
“They’ve completed long term-based breakouts. These base breakouts that we’ve seen in the likes of GE bode well for a long term at least participation if not also outperformance. It’s really part of that rotation from … growth to value that we saw during November, and that was significant, so it could mean higher prices for these names beyond the near term,” said Stockton.
