One of November’s worst performers could quickly see a sustained comeback.
That was two merchants’ takeaway from a assessment of some of the month’s largest S&P 500 laggards, together with however not restricted to:
The above declines are as of Wednesday’s shut.
“Several of these turkeys … have definitely violated uptrends in this last month, but there’s one of them here that probably should be pardoned,” Craig Johnson, senior technical analysis analyst at Piper Sandler, mentioned Wednesday on CNBC’s “Trading Nation.”
He cited a chart of clothes maker Hanesbrands’ inventory, which he mentioned not too long ago reversed a downtrend that stemmed from its 2015 highs.
“Note that the stock pulled right back — predictably — to its 200-day moving average, has rallied off of it, and the 50-day moving average has started to cross back above the 200-day moving average,” Johnson mentioned.
That factors to the beginning of an uptrend that could take Hanesbrands shares again to highs not seen since final yr, the analyst mentioned.
“[It] looks like, to us, we could see perhaps a move back to the high teens, which could give you about 30% upside,” Johnson mentioned. “So, it doesn’t look like this is one for the stuffing quite yet. This looks like one that we should be buying at this point in time. Put a little bit more on the plate — and a little more gravy.”
Gina Sanchez, founder and CEO of Chantico Global and chief market strategist at Lido Advisors, additionally noticed potential in Hanesbrands.
“This is one that we covered when we looked at the most shorted stocks by hedge fund players,” she mentioned in the identical “Trading Nation” interview.
The overarching brief promoting thesis was constructed on three pillars, Sanchez mentioned: encroaching competitors in underwear and activewear; Hanesbrands’ excessive working leverage tied to proudly owning its personal manufacturing services; and the Covid-19 pandemic slamming brick and mortar, a key distribution channel.
“What they didn’t plan on was that Hanesbrands managed to grab a government contract to make personal protective gear,” the CEO mentioned. “Now, they are able to take what was a big liability — their manufacturing facilities — and turn it into a huge positive.”
That enterprise has helped Hanesbrands rake in “a tidy profit of over $750 million,” Sanchez mentioned, acknowledging that “going forward, they’re expecting that PPE business to fall” to round $150 million.
But with most traders looking forward to an eventual financial restoration, Hanesbrands could not want that income stream for lengthy, she mentioned.
“I think much of their business is going to perk back up as the economy reopens and it’s cheap and it pays a good dividend that’s quite sustainable,” she mentioned. “So, there’s a reason to own this stock.”
Hanesbrands shares ended buying and selling Wednesday down greater than 2% at $14.50.
The S&P and Dow slid on lower-than-usual buying and selling volumes as Wall Street digested disappointing jobless claims knowledge forward of the Thanksgiving market vacation. They are up 11% and almost 13% in November, respectively.
Disclosure: Piper Sandler will purchase and promote securities on a principal foundation for Danaher.