Blue Line Capital: It's Time to “Go Shopping,” and Here's What to Pick Up

If you're looking for a way to start a fight among brokers these days, one of the best ways may be to suggest that it's time to “buy the dip,” a term that means, essentially, start buying after a large-scale drop in stock prices. Some big names have come out against this concept, like Citi, Goldman Sachs, and just recently, Barclays. Blue Line Capital, as expressed by founder and president Bill Baruch, is not on that list, at least when it comes to certain stocks.

The Dow's Moving Average Suggests a Good Time to Buy In

Baruch isn't under any illusions about the state of the market right now. That tends to be clear when his assessment of the current market is that it's “a bloodbath.” That's not just colorful exaggeration, either; last week was the worst week since 2008, and it's hard to remember 2008 without shuddering at least a little.

Yet Baruch also wasn't suggesting panic in the midst of this bloodbath. No, in the grandest American tradition, Baruch put forth a bold yet familiar stratagem: when the going gets tough, the tough go shopping. The biggest support for such a plan came based on the most recent close for the Dow, which came in at 25,409. That's a stone's throw away from a point Baruch suggested was a floor level based on numbers from 2016, when the market started its upward climb.

Individual Stocks Offer Similar Hope from Averages

That's good news, especially for anyone still shrugging off the shell shock of the last week. But Baruch didn't stop making points with moving averages and trend lines there, pointing out several individual issues that reports noted he already owned. Microsoft (NASDAQ: MSFT), for example, as despite losses in last week's disaster, it was still trading above the 200-day moving average. While it did lose ground through the week, it had also recovered ground ahead of Friday's close. It's also ahead of its Friday close, trading at $163.44 as of this writing.

Apple (NASDAQ:AAPL) likewise offered some hope, as it was trading not only around the 200-day moving average, but also was looking at what Baruch called a “breakout area” from its 2018 numbers. Like Microsoft, it's currently ahead of its Friday close, trading at $280.92 as of this writing.

Lastly, Baruch called particular attention to Chevron (NYSE: CVX), an unusual step for a man who'd been actively eschewing energy stocks for some time. Once again, however, the trend line stepped in and gave Chevron a decent floor down around the $80 level. With Chevron trading a hair over its Friday close at $93.45 as of this writing, that makes a pretty decent point of support.

A Light at the End of the Tunnel?

There are already plenty of analysts out there suggesting that now is not the time to buy stocks. We've already seen word from several big names as noted previously, and they're not alone. Chantico Global's Gina Sanchez noted that recent moves have been erratic to say the least, and with some sectors trading with price-to-earnings ratios around 25 : 1 or so, it's clear that there are still some overvalued points that could use a little paring to better approach reality.

Considering Baruch's targets, though, there are cases to be made for each. Microsoft is going into a new console generation, and what's known of the upcoming Xbox Series X console so far suggests it could be a serious game-changer on several fronts. Apple, meanwhile, should have a new product to talk about going into 2020, as it commonly does, though little is known about it as yet being that the standard September /  October launch window is still most of a year away. Both Microsoft and Apple, however, will have some concerns stemming from the coronavirus, which is still likely to have an impact on supply chain operations. Apple was already seen lowering guidance for 2020. However, it's a safe bet that both are looking at alternate sources for parts supply, and we've already seen Microsoft move in that direction with Surface tablets coming out of Vietnam. Chevron, meanwhile, is likely hurting from a glut of oil in the market owing to declining use as people stay home, avoid crowds, and drive less.

Still, all three of these companies stand to gain if the coronavirus can be brought to heel insufficiently rapid fashion. And if it isn't, chances are the economic fallout will be sufficient to send everyone on a downward slope.