The market feels very heavy, and with big announcements coming this week, things may be poised to get a little volatile. The Federal Reserve meeting, along with numerous other central banks releasing data, combined with the Dutch elections and a huge snowstorm, are all items that traders will be keeping their eyes on. One thing is for sure: the first stocks that will be sold will be the overbought momentum companies. So it makes sense to steer clear of them for now.
The analysts at Stifel have done some outstanding work on four companies that are oversold to some degree and may be offering investors some solid contrarian value. All are rated Buy, but they are more suited for accounts with a higher degree of risk tolerance.
Dicks Sporting Goods
This stock has become one of the top retail stories over the past few years. Dicks Sporting Goods Inc. (NYSE: DKS) is a full-line sporting goods retailer that offers a broad assortment of brand and private label sporting goods apparel, footwear and equipment in a big-box store format. The company also operates specialty stand-alone golf stores under the Golf Galaxy name and an Outdoor specialty store under the Field & Stream banner.
Top analysts note that sporting goods stores are a silo of hardline retail that typically survives higher interest rate moves reasonably well. An improving economy should also keep a tailwind behind what many consider to be the premier franchise in the industry.
The Stifel team feels that the Gander Mountain bankruptcy opens the door for market shares gains at the retailer, and they said this in the report:
We believe Dick’s Sporting Goods will be content to see a competitor go by the wayside and believe the auction process is unlikely to find a buyer for the chain as a whole. For vendors doing business with Gander Mountain, credit exposure appears contained though the store closures would be a headwind to future revenues.
Shareholders are paid a 1.42% dividend. The Stifel price target for the stock is $65, while the Wall Street consensus target is set at $60.44. The stock closed Tuesday at $47.83 per share.
Hutchison China Meditech
This off-the-radar biotech stock not only has upside potential, but it also has traded sideways since the 2016 initial public offering. Hutchison China Meditech Ltd. (NASDAQ: HCM) is an oncology-focused biotech company with expertise in developing selective tyrosine kinase inhibitors for cancer treatment. In addition, the company owns a commercial platform that generates income and helps fund research and development. Partnerships with AstraZeneca and Eli Lilly validate the technology.
The company has recently posted some outstanding clinical data. Fruquintinib demonstrated efficacy for metastatic colorectal cancer in Phase 3 trials, and top analysts are looking forward to a more detailed presentation at the American Society of Clinical Oncology annual meeting in June. Savolitinib is slated to enter development in papillary renal cell cancer, and a Phase 3 decision in non-small cell lung cancer. The pending Phase 2b data is expected by summer.
Stifel raised its price target to $22 from $20, and the consensus target is $18.63. The shares closed most recently a $16.00 apiece.