One of the most unloved stocks on Wall Street has just taken investors by surprise.
American Airlines, the S&P 500 stock with the most sales and underperforming ratings, posted a smaller than expected loss in its recent quarter. Shares saw volatile swings on Thursday, up more than 30% at one point. The high short-term interest rate caught the attention of Reddit merchants targeting troubled names like GameStop and AMC.
Unloved stocks like American Airlines could get an even bigger lift this year, said Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors.
“We’re looking at recovery. That recovery may take time, but I think most investors are really focused on that recovery, and so investors are really starting to look for opportunities to put their money into less loved stocks that could benefit from that recovery – a recovery in an emerging tide-lifts-all-boats scenario, “Sanchez told CNBC’s” Trading Nation “Thursday.
American Airlines has come under pressure over the past year as the coronavirus pandemic hindered travel at home and abroad. The stock is up 119% since a low in May, but is still 41% lower than its peak in February.
“If you had to get picky last year and be very specific about where you wanted exposure, then you could actually see the next year that the recovery is benefiting broad sectors, and that’s where something that’s really cheap, like with American Airlines or in the consumer discretionary sector such as a Bed Bath & Beyond… could benefit from a major boost for the entire industry, ”said Sanchez.
Bed, Bath & Beyond is also a high-short stock with above-average sales ratings: the 63% short stake has also attracted Reddit traders and caused a short squeeze. Shares are up 89% this year as retail flows prompt short traders to hedge their positions.
Katie Stockton, founder of Fairlead Strategies, agrees that American Airlines’ rise was driven by revenues and retail involvement. She sees that outbreak continuing, and it’s not the only company with a high number of sales ratings she’s backing.
“Another example of an unloved stock on Wall Street is Western Union… and that stems from the same relatively oversold status,” Stockton said in the same interview. “It also has a bit of a sideways kind of price action, a series-bound lineup that would kick off nicely for a breakout with resistance pretty much in line with current levels. So I think that was the kind of setup that was preferred during this earnings season. “
Western Union, whose earnings report is expected on February 9, has lagged the markets’ recovery – it is up 32% from its April low, but remains 19% below its February high. The stock has six street sales ratings.
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