Week of August 26th, 2019
Markets became aggressively volatile late last week.
All after China announced plans to raise tariffs on $75 billion worth of U.S. goods. New tariffs ranging from 5% to 10% will take effect on September 1 and December 15, 2019.
“Based on what I know,” tweeted China’s Global Times’ chief editor, “China will take further countermeasures in response to US tariffs on $300 billion Chinese goods. Beijing will soon unveil a plan of imposing retaliatory tariffs on certain US products. China has ammunition to fight back. The US side will feel the pain.”
From here, it’ll be interesting to see how the U.S. reacts to the news.
Remember, just last week, President Trump extended a reprieve to Huawei, allowing it to buy supplies from US companies so that it can continue servicing existing customers. That also follows the Administration’s delay on the 10% tariff on $300 billion worth of Chinese goods.
As we wait to see what happens next, we have an eye on oversold stocks.
Opportunity No. 1
ON Semiconductor (ON)
Not only is ON Semiconductor technically oversold, but it’s also seeing solid upgrades on Wall Street. In fact, Raymond James just upgraded the stock to a Strong Buy rating from Market Perform with a near-term price target of $21 a share. The firm turned bullish on the stock based on reduced valuations and improving growth prospects.
Opportunity No. 2
In recent days, Pfizer plummeted after announcing a deal to hand off a division that makes older drugs to Mylan. Following this, Pfizer says it will be a smaller company with a focus on biopharma and a strong pipeline. “As a result, our product portfolio and pipeline will more easily move the needle in terms of growth impact given our smaller size,” the company told Barron’s. “In addition, we will continue to have a very strong balance sheet with a solid credit rating.” In our opinion, this $10 pullback as a severe overreaction, and believe Pfizer will refill its bearish gap at $42 and head higher with patience.
Opportunity No. 3
Etsy Inc. (ETSY)
Etsy recently reported it earned 14 cents a share in the second quarter, which was a penny higher than expected on revenue of $181.1 million. Unfortunately, revenue of $181.1 million, which was $2 million short of expectations. However, it did boost its outlook for full-year revenue and gross merchandise sales. We view the latest pullback as a severe overreaction.