3 Stocks Leading Recent Gains

Was it a dead cat bounce, or a white flag from the bears? It will be a few weeks yet before we can say, but one thing’s for sure, the market logged a big rally yesterday that was very much needed. The S&P 500 index is on track to log its third red month in a row, something that hasn’t happened since August 2011, and Wall Street is on the ropes. A combination of rising interest rates, rising inflation, and fears of a third World War have combined to scare the pants off of investors. Many of the top-performing equities from the past two years have given up all their pandemic-driven gains, and are back trading at levels that suggest the once-in-a-lifetime boom in business never happened. 
These growth stocks were already feeling the pain towards the back end of last year, but the contagion to other sectors and markets has been rapid since the calendars were turned over. A fresh COVID outbreak in China is going to do investors no favors either, and the US10YR has been sent to its highest level since the summer of 2019. But that’s not to say there isn’t some value to be had amongst all the bloodshed. Especially hard bounces on days like yesterday can signal that certain stocks are considered oversold by the smart and big money funds. Let’s take a look at three that might warrant closer consideration.

American Airlines (NASDAQ: AAL)

Shares of American Airlines jumped more than 9% yesterday, and over the past week have tacked on an impressive 21% compared to just 1% for the S&P 500 index. This is very much against the grain of what’s seen over the past year for example, but highlights the potential value that’s on offer with American Airlines right now. 

Earlier this week, they provided one of Wall Street’s most treasured updates, a revenue guidance update with a surprise upside. Management had previously been forecasting Q1 revenues to be down -20% to -22% from 2019 levels, the current benchmark for performance as it ignores the wild volatility of the pandemic dominated quarters. But they surprised investors by saying they’re now expecting revenue to be only off by -17%, a solid improvement that bodes well for the stock’s continued recovery. 

NVIDIA (NASDAQ: NVDA)

A 7% jump yesterday meant that shares of Nvidia hopped up off their $210 support level for the fifth time this year. The bears have been unable to take them lower, and the constant bid that has appeared here suggests that any kind of broader market rally would be magnified in the shares of the Santa Clara headquartered semiconductor giant.  

Late last month, Goldman released a study that screened for the biggest buy and sell flows in equities over the last three months. In another sign of just how strong demand is Nvidia down at these prices, they found themselves at the very top of the list. We know from their most recent earnings report that revenues are still growing by more than 50% year on year and the semiconductor industry has been earmarked to be one of 2022’s hottest industries. If / when the current volatility subsides, we can expect Nvidia to quickly start moving back towards the $300 mark. 

Tesla (NASDAQ: TSLA)

Also on that list of biggest inflows from Goldman last month was Tesla. Their shares are currently down 30% since the first week of January, but more importantly, are up 15% since last month’s low. Wall Street needs no warning about what kind of speed Tesla can move higher if a risk-off sentiment returns. 

With oil surging to multi-year off the back of the Russian-Ukraine war, it’s been a long time since a tank of gas cost so much. That’s forcing more and more consumers to consider making a permanent change to an electric vehicle, and investors know this can only be a tailwind for companies like Tesla. While the company is facing higher costs, driven no doubt by higher interest rates, they have raised their prices in response and the market is responding well to this. 

If Tesla shares can keep trading above $700 through the remaining weeks of volatility ahead, there’s every reason to think they’ll be eager to get back to four digit prices as soon as the volatility subsides.