Why Panic Now When You Can Profit Later?

Remember, the latest episode of the Zacks Ultimate Strategy Session will be available for viewing no later than Wednesday, February 7. Sheraz Mian, David Bartosiak, Tracey Ryniec, Brian Hamilton and Neena Mishra, CFA, FRM, will cover the investment landscape from most every angle in this informative event.

Don't miss your chance to hear:

• Tracey and Neena Agree to Disagree on whether or not to buy Cryptocurrencies
• Neena and Brian answer your questions in Zacks Mailbag
• Neena and Brian choose one portfolio to give feedback for improvement
• And much more

So be sure to mark your calendar then log on to Zacks.com and bookmark this page.

Wow! The market dropped more on Monday than it did all of last week…and that was a pretty bad week! Without further ado, here are the ugly details. The Dow plunged 4.6% today (or 1175 points!) to 24,345.8. The S&P slipped 4.1% to 2648.9 and the NASDAQ was off 3.8% to 6967.5. That hurts…

The knee jerk reaction to such a massacre is to freak out. But it’s really not too hard to find a silver lining in today’s extreme pullback.

“I couldn’t be happier,” said Kevin Matras in Options Trader. “This recent pullback is exactly what the market needed. I know pullbacks can be tough when you’re going thru them. But if you believe as strongly as I do that this market is far from over, then every pullback looks like a welcomed sale and not a going out of business sign.”

That idea permeated throughout most of the portfolios on Monday. While the market went down, the editors came in to buy. Many had been waiting for a pullback, and the past few days have provided the opportunity to pick up quality companies at prices not seen all year. In the highlights section below, you’ll see five portfolios that made 11 buys in total…and that’s not including the eight swaps in Black Box Trader.

Let’s put an end to this day and get right to those moves. But first, here’s a few words from Dave:

“I added to both of my services today, scooping up deals early on in the session. Guess what I’m doing tomorrow? I’m going back to the well to get more. I’ll be adding when the market gaps down in the morning because the madness has to stop,” he said in Momentum Trader and Surprise Trader.

Today's Portfolio Highlights:

Counterstrike: On Friday, Jeremy stated: “No matter what happens, we need to be buyers next week. We finally got our sell off we have patiently waited for.” The editor wasted no time on Monday morning. He picked up these four new names:

• Brinker Int’l (EAT)
• CA Inc. (CA)
• IDEXX Labs (IDXX)
• athenahealth (ATHN)

Each of these stocks are Zacks Rank #1s (Strong Buys) that recently reported strong numbers. EAT, CA and IDXX have plunged despite their results, while ATHN has NOT succumbed to market weakness. Jeremy is taking a smaller 5% position in each of these names because the selloff may not be over and he wants the option to buy more on a dip.

The portfolio also sold ConocoPhillips (COP) and DMC Global (BOOM) for profits of 8.8% and 4.5%, respectively. The complete commentary has a lot more info on today’s moves. And be ready for even more buys in the coming days as this selloff is playing right into the editor’s hands by putting companies with strong earnings on sale.

Options Trader: The portfolio added two names on Monday. Firstly, Lithia Motors (LAD) is a Zacks Rank #1 (Strong Buy) in a highly-ranked industry with a Zacks VGM Score of “A”. Technically, the stock has pulled back to the apex of a bullish ascending triangle pattern, which is a great place for a breakout to occur. It reports on February 14 and has a positive Earnings ESP. Kevin bought to open 3 June 125.00 Calls and sold to open 3 June 130.00 Calls.

The other move today was in Arrow Electronics (ARW), a major distributor of electronic components and computer products to industrial and commercial customers. Like LAD, it too is in a bullish ascending triangle pattern. However, this stock reports tomorrow and has an Earnings ESP of 1.05%. Kevin thinks that a positive announcement could set ARW for an enduring breakout. He bought to open only 1 June 82.50 Call, but would add more on a positive performance. Get more specifics about these moves in the full write-up.

Surprise Trader: “You buy when there’s blood in the streets,” says Dave. The editor is speaking figuratively of course. In other words, when a strong market pulls back vigorously, it’s a great time to put some money to work. On Monday, the portfolio picked up Total Fina (TOT) and Penn National Gaming (PENN).

TOT is an oil and gas production company that has a solid Earnings ESP of 11.32% for the quarter to be reported later this week. This could be a real quick turnaround. PENN reports after the bell on Thursday and has a positive Earnings ESP of 7.9%. The company reported a big beat last time and its estimates have been moving up nicely over the past year. Both stocks are Zacks Rank #2s (Buys) and are being added with 12.5% allocations. Read the complete commentary for more.

TAZR Trader: Kevin does not believe this is a double-digit correction, but it is deep enough to put some cash to work in front of a possible March-April rally. Therefore, the editor added more allocation to his favorite stock: NVIDIA (NVDA). The “monster of all things advanced computing” reports on Thursday, and he thinks it will be strong enough to make $220 a great place to add. Get more specifics on the move in the full write-up, along with Kevin’s 5 takes on the market right now. And be ready for even more trades soon...

Momentum Trader: The portfolio picked up a couple of stocks during the pullback: Monster Beverage (MNST) and Kirby (KEX). The chart for MNST appears to be setting up one of Dave’s favorite continuation patterns. As for KEX, the company recently reported a nice earnings beat and is breaking out from its 52-week high on solid volume. Both stocks are Zacks Rank #2s (Buys) and are being added with 12.5% allocations.

Black Box Trader: The portfolio is almost completely new this week as eight stocks were swapped out. The positions that left the portfolio were:

• Huntsman Corp. (HUN, +4%)
• Prudential Financial (PRU)
• Nordstrom Inc. (JWN)
• CBRE Group (CBG)
• Macy's Inc. (M)
• Kemet Corp. (KEM)
• Sysco Corp. (SYY)
• HollyFrontier (HFC)

The new buys that replaced these names are:

• Builders FirstSource (BLDR)
• Delek US Holdings (DK)
• HCA Healthcare (HCA)
• KB Home (KBH)
• Meritor Inc. (MTOR)
• Tailored Brands (TLRD)
• Taylor Morrison Home Corp. (BLDR)
• The Michaels Companies (MIK)

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.

Zacks Confidential: There’s nobody better to give you the lowdown on earnings season than Sheraz Mian, our Director of Research here at Zacks. There’s still a lot of the season left to come, and so far it’s looking pretty good. The percentage of EPS and sales surprises have each topped around 80%! In this week’s Zacks Confidential, Kevin asked Sheraz to breakdown earnings season. Read his very detailed article and get two picks with strong earnings profiles by clicking: Q4 Scorecard. 

All the Best,
Jim Giaquinto

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