Second Chance Sale: 3 Stocks That Look Attractive After the Market Selloff

The market's late October selloff was rooted in a variety of factors including rising coronavirus cases, election concerns, and the absence of a second stimulus package. And while it made some investors want to stay on the sidelines, for others it has created some great second chance buying opportunities.

Zoom Video Communications (NASDAQ:ZM), Ollie's Bargain Outlet (NASDAQ:OLLI), and PulteGroup (NYSE:PHM) have all had great years—and yet all rode the broader market tide lower. But with these companies' growth narratives unchanged, investors have been presented with some early Christmas presents.

Is Zoom More than Just a Pandemic Stock?

Zoom has pulled back to its 50-day moving average in fairly benign volume. The 23% decline from the $588.84 intraday high is inviting investors to join in on perhaps the pandemic's top stock success story.

The big question around Zoom is whether its pandemic-driven growth will amount to a one-hit wonder or be sustainable. This will largely depend on the degree to which business is conducted remotely over the next few years.

First off, the recent resurgence in COVID-19 cases and questions around vaccine availability and effectiveness suggest the virus will be with us for a long time. Therefore, there's a good chance we are going to be spending a lot more time at home in front of our computers.

Second, even once the pandemic subsides, video communication for work and personal purposes will likely be a regular part of our lives. Zoom is becoming engrained in our daily lives. There will undoubtedly be a level of permanence to our communication behaviors.

'Zoom' has become synonymous with 'video calling' for people all over the world. Like 'Google' evolved into a verb for 'web search', Zoom is now a verb for online communication. This makes it an incredibly strong brand that has the potential to build off its recent success for years to come.

A closer look at the technical picture shows that Zoom has peeked out of the lower end of the Bollinger band on the daily chart. And a glance at the MACD indicator also point to a bottom. Look for a run comparable to what we saw start in August may be repeated in the weeks ahead.

Zoom is scheduled to report third-quarter results on December 3^rd. The consensus forecast is for EPS of $0.57, but there's a good chance that figure gets upwardly revised as we get closer to the report. Zoom is here to stay and there probably won't be many significant pullbacks in this stock.

Can Ollie's Bargain Outlet Execute its Growth Plans?

The dip in Ollie's share price has been more subtle, but the stock nevertheless looks like a bargain here. It too is a pandemic beneficiary that will likely continue to benefit in the near term as price-sensitive consumers hunt out Ollie's deals.

But the company has some longer-term growth catalysts as well that could produce a sustainable rally in the stock for the next couple of years. Ollie's is on track to add 46 locations in fiscal 2020 after adding 42 last year. This would mark the fifth straight year the company has increased it tally of new store additions.

Looking further down the road, management sees an opportunity to reach the 1,000-store mark over time. This would suggest some substantial growth lies ahead given Ollie's current 366 store footprint.

What's especially compelling about the Ollie's expansion story is that the company currently has a presence in only half of U.S. states. Given the building momentum behind consumers' interest in Ollie's vast product assortment, low costs, and promotions, it's conceivable that the infectious nature of the Ollie's Army loyal customer following can spread nationwide.

Ollie's quarterly earnings report is also late on the docket. When it reports on December 8^th the Street will be looking for EPS of $0.58 which represents 41% year-over-year profit growth. 

Is PulteGroup the Best Homebuilder Stock?

The recent market downturn has opened the door for investors to buy PulteGroup stock. After flirting with the $50 mark, the share price corrected to around $40 briefly slipping outside the lower Bollinger band.

PulteGroup has already reported third quarter results topping revenue estimates and delivering EPS that were roughly in line with expectations.

Yet with 30-year mortgage rates hovering around historic lows, PulteGroup appears to be in the early stages of a multi-year rally. The company should capitalize on steady demand for new home construction amid low mortgage rates and pandemic driven demand for more spacious suburban living.

As one of the country's biggest homebuilders, PulteGroup is poised to build off its nearly $10 billion in home sales from last year. Why should investors favor Pulte over the other homebuilder stocks?

Well with real estate, we often hear that the most important thing is 'location, location, location'. For PulteGroup as an investment, the mantra is 'diversification, diversification, diversification'.

First, Pulte's geographic presence is well spread out around the U.S. This gives it the flexibility to adjust its strategy to capitalize on hot real estate markets and mitigate downturns in cooler markets.

Second, it offers six distinct homebuilding brands that each cater to a targeted demographic. From the entry-level Centex homes for first time buyers to Del Webb residences for active adults, Pulte's product portfolio is very well diversified.

This enables the company to capture a broad slice of the American homebuying population. With homes prices across the value spectrum, Pulte doesn't depend on any one customer type. While one-fourth of sales are derived from the sought after $500,000 and above segment, Pulte's portfolio has a nice barbell shape. A quarter of its sales also come from the under $300,000 home category.

Stepping outside the houses and back into the investing world, PulteGroup shares are cheap here at 10x forward earnings. This dividend paying stock should definitely be part of the foundation of a long-term value portfolio.