I recently had the good fortune of listening to James Altucher speak at a conference, and one of the things he mentioned was how buying and holding a stock for 2 days on the heels of a 3 day consecutive sell off in that stock was a historically proven way to make some smart returns.
With the 3 day broader market sell off that has bulls shaking in their shoes, there are plenty of stocks one could buy and hold for two days, but a phrase comes to mind that prevents me from buying aggressively now - "Past results are not indicative of future performance".
So here are stocks that I believe should be bought at dips. I expect the market to correct for at least a few more days so remember not to buy your entire position at once.
Goldman Sachs - This stock is down $14 in 6 straight down days. With a multiple of $10, I can't believe that the market has the audacity to send GS down like this. The 3% drop alone yesterday puts this stock just around its 50-day average. I think the stock will probably dip some more, but I would not be shy of a small position at current levels with an increasing position every 2% lower.
Gilead Sciences - GILD is perhaps the best biotech/drug stock out there. It has dropped 7% in the last 3 days and sits just below its 50-day average. Earnings are growing at over 50% and the company has beaten estimates every quarter for at least the last 4 quarters.
Activision - Options scandals have really not impacted good companies with fast growing businesses. Aside from a short-term hit, these stocks usually come back: Apple and Monster.com are two such examples. Guitar Hero has been a hit on XBox 360 and the Wii launch is right around the corner. Additionally, the company is releasing its popular Call of Duty franchise's fourth installment for the PC this summer. With the gaming cycle in full force, ATVI is a great stock to own, specially considering its down over 10% in the last month.
Boeing - Boeing is not a buy yet. It needs to go down a little more, and it probably will. When it gets to $95, I believe its time to buy some. They are hitting on all cylinders and demand for their jets doesn't seem to let up. If jet fuel prices remain as high as they are, demand for their new Dreamliner will be better than expected.
AT&T - I cannot believe the stock is under $40. It has performed exceptionally well this year and those who missed the boat earlier should get ready to pounce on the stock. With the iPhone release right around the corner, T will benefit from customers switching from other carriers, lured by the seductive iPhone. Furthermore, cost savings from the Cingular merger will improve their bottom line this year.
Continental Airlines - CAL is now trading at 7.5 times earnings. This is a ridiculously low multiple for an airline of such a high quality. There is plenty of technical support at current levels. In fact, the stock has bounced back from these levels four times since March alone. This is my favorite US airline stock and investors should start looking at it more seriously. Remember, the market thinks 6-8 months ahead. Oil should be lower by then. If thats the case, airlines will rebound.
Peabody Energy - While other energy stocks have kept up, BTU is down about 10% this week alone. With coal providing a majority of our energy needs and oil prices as high as they are, BTU is in a strong position. Buy!
Finally, I would just like to point out that Apple, Garmin, Google and Research in Motion, have held execptionally well during this correction and are a beacon of hope for investors.
I will look for more opportunities during this correction and post them next week. Until then!
-- Faisal Laljee
Full Disclosure: I own BTU, AAPL, GRMN, RIMM and T but my position can change anytime without notice.