The S&P 500 closed out the third quarter barely positive, but the three-month stretch was worse for many stocks.
Beyond Meat, Roku, Gap, Peloton and Phillips 66 were among the stocks that posted double-digit losses since the beginning of July.
CNBC’s “Trading Nation” asked its traders which of these down-and-out stocks might be on the up and up in the fourth quarter.
Quint Tatro, president of Joule Financial, is sticking with one of the few laggards in the energy space.
“A name that we are looking at going into the next quarter is Phillips 66,” Tatro told CNBC’s “Trading Nation” on Thursday. “It’s an attractive value play for us. It’s trading 11 times earnings, less than one times sales, boasts a 5% dividend.”
Phillips 66 tumbled 18% in the third quarter, the worst performer in the XLE energy ETF. It is also flat on the year, while the XLE ETF has added 37%.
“People forget, it’s kind of a reopening play as well,” he said, referring to its gas stations in the U.S. “As more people take to the roads, I think that they’re going to continue to do well, and so it’s good attractive value. I think the risk reward is right here.”
JC O’Hara, chief market technician, says investors should be careful while digging for deals among some of the worst performers. He says one rule could separate the unfairly beaten-down stocks from the value traps.
“What you want to do technically is you want to find the names that are oversold, but the key point of being oversold is you also want to find the names that are sitting on technical support — levels where buyers have historically stepped up and supported this stock, and that’s why I’m excited about Roku,” he said during the same interview.
“If you look at the chart of Roku, there’s a clear double top at $500. That’s a fancy way of saying that’s where the sellers sit, but conversely, right at that $300 level, right around where the stock is trading now, that has been where the buyers have showed up over the last few months,” he said.
He anticipates a bounce off that support level, propelling the stock back to his target at $375. That implies roughly 20% upside from Thursday’s close of $313.35. Shares fell 32% in the third quarter.
