From the Desk of Ian L. Cooper
One of the best ways to make money in the market is by finding great stocks that are down temporarily. It’s not as if these companies will ever go out of business. All we have to do is buy when others are fearful, and wait for the eventual move higher.
We’re simply using the Buffett, Rothschild, and Templeton rule of buying fear.
Buffett tells us to be greedy when others are fearful, and fearful when others are greedy. Baron Rothschild tells us to buy when there’s blood in the streets. Sir John Templeton tells us to buy on excessive pessimism when others run scared.
Here are two that we can buy and hold that should pay off with patience.
The Kraft Heinz Company (NASDAQ:KHC) manufactures and markets food and beverage products in the United States, Canada, Europe, and internationally. Its products include condiments and sauces, cheese and dairy products, meals, meats, refreshment beverages, coffee, and other grocery products.
In recent weeks, the stock gapped significantly lower on earnings. The company posted a loss of $12.61 billion. EPS missed estimates. Revenue missed estimates. It even decreased its dividend to 40 cents a share from just above 62 cents. However, much of the bad news appears to have been priced into the stock. Even Morgan Stanley analysts agree, upgrading the stock from Underweight to Equal Weight with a price target of $35, near-term.
Technically, KHC is aggressively oversold and just beginning to turn higher. Not only is it stuck at its lower Bollinger Band (2,20), RSI, MACD, and Williams’ %R tell us the stock is overdue for a near-term push higher. We believe that gap at $47.50 can be filled with patience.
Square Inc. (NYSE:SQ) provides payment and point-of-sale solutions in the United States and internationally. The company's commerce ecosystem includes point-of-sale software and hardware that enables sellers to turn mobile and computing devices into payment and point-of-sale solutions. It offers hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts Europay, MasterCard, and Visa (EMV) chip cards and Near Field Communication payments; Chip card reader, which accepts EMV chip cards and enables swiped transactions of magnetic stripe cards; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; and Square Register that combines its hardware, point-of-sale software, and payments technology, as well as managed payments solutions.
With the slight pullback on guidance, we’re using the drop as a reason to buy again. We still believe SQ is a $100 stock currently trading at $75.