Today’s news: Alexion Pharmaceuticals (ALXN) moves from Buy to Strong Buy; plus additional buy recommendations during this week’s market correction.
Good morning, and welcome to the October 2018 stock market correction.
Stocks don’t go straight up, right? Unless you began your stock-investing career two weeks ago, you know that stocks bounce around. They bounce upward during bull markets and they bounce downward during bear markets. We are currently experiencing a price correction during a bull market. Nothing horrendous has happened to U.S. companies. They’re not suddenly going bankrupt. Consumers did not cease spending money. Workers are not being fired en masse.
It’s just a normal stock market correction. We had a big correction in February, and now we’re having a smaller correction in October. And in between those two dates, the major U.S. stock market averages completely recovered from the February correction and rose to new all-time highs.
My suggestion is that patient and opportunistic investors buy stocks during this temporary market downturn. You hopefully have a short list of stocks that you’d love to buy on pullbacks, as I do. For example, I received price alerts on Alexion Pharmaceuticals (ALXN), Blackstone Group (BX) and Royal Caribbean Cruises (RCL). Those alerts have been keyed in for several weeks or months, because I told myself, “When these stocks fall to these prices, I want to buy them.” So this morning, I bought them. (I don’t second-guess these decisions when the prices finally drop, unless the prices are dropping due to obvious bad news. But most price fluctuations are relatively unrelated to the successes or failures of a company, so I’m happy to buy low and wait for the rebounds.)
If you want to go shopping, here are my best ideas right now:
Alexion Pharmaceuticals (ALXN) moves from Buy to Strong Buy now that the stock has pulled back. At 124, there’s about 12% capital gain potential within the current trading range, and the likelihood of additional gains next year. Strong Buy.
Blackstone Group L.P. (BX – yield 6.3%) -- The stock remains solidly within its trading range, and with the price dropping to 35.36, the yield has bumped up to 6.3%. Take advantage of this week’s lower price and lock in the higher yield (although remember, limited partnership yields vary from quarter to quarter). There’s about 13% capital gain potential as BX retraces its recent high. Speculative investors have an opportunity to make even more profit if BX converts from an L.P. to a C-corp. next year. Buy.
Delta Air Lines (DAL – yield 2.7%) – Delta reported a great third quarter this morning, and the stock is up about 5%. I don’t have time to review the quarter for you without delaying this Special Bulletin, so I’ll report separately in the coming days. There’s 14% upside to the stock’s very recent peak, and additional capital gain potential thereafter. Strong Buy.
DowDuPont (DWDP – yield 2.5%) --
Chemical stocks fell when industry peer PPG Industries (PPG) warned that third quarter sales would be flat due to higher raw material costs, softer China demand and weakening foreign currencies. The drop in the sector was exaggerated by the overall market correction that we just experienced. I still expect DWDP to be attractively profitable by mid-2019 when it’s done separating into three companies. However, there’s no hurry to buy today, because the stock is probably going to remain near 60 while it slowly gathers strength for its rebound. Patient investors can buy at a good price today. Strong Buy.
Strong Buy.
Royal Caribbean Cruises (RCL – yield 2.0%)
joined the Buy Low Opportunities Portfolio on August 7 at 112.13 for a short-term trade. I then retired the stock on Sept. 18 at 129.45 because it reached my trading goal. Now that the stock is trading at 117.42, feel free to buy it back for another short-term trade. I’m not adding RCL back into the portfolio because I have too many stocks in our portfolios right now. But if you’re adept at identifying trading ranges on price charts and making buy/sell decisions without getting emotional, RCL presents a good buying opportunity today. (And as I’ve previously mentioned, RCL is an attractive stock for any high-quality, long-term portfolio.)Total S.A. (TOT – yield 4.8%) rose above its trading range in late September, then pulled back a small amount. Buy TOT now before the run-up commences. Strong Buy.