Giving Stocks a Second Chance Can Lead to Handsome Rewards

Few stocks go up in straight-line moves. Most tend to spurt higher, tail off, then rise again. The interim selloffs often shake out traders who mainly trade on momentum, plus those who fail to understand the companies' true worth. This article will feature a few of my current favorite stocks, and how they gave us second chances to accumulate them even after good-sized earlier rebounds from their March 2020 lows. In fact, three of the four examples carved out multi-year nadirs even cheaper than their virus-induced March-April 2020 bottoms. One of that trio is regional bank Boston Private Financial Holdings BPFH. From a March 23 bottom of $5.18, it quickly rallied back to $8.73, a greater than 65.5%, five-week rebound. Five months later, though, BPFH established a new all-time low of exactly $5. Rather than cry about that decline, I used it to advantage by greatly increasing my exposure to the stock. Unlike many traders, I love averaging down, if the underlying fundamentals still look good. Just 10-days later, BPFH closed at $6.27, up 25.4% from that crazy low. It still appears unusually cheap. Boston Private topped at between $12.37 and $17.88 each year from 2013 right through 2020 year-to-date. Next up is Interface TILE. I recently recommended TILE on Sept. 13 at $6.81 per share. After a nice initial rally it slacked off, dropping to as low as $5.98 on Sept. 23. Since I'm looking for a double or triple on this name that was truly a gift. I went to town adding to my position size. At its Thursday closing price of $6.96 it had already recouped 16.4% in just about two weeks. There's every reason to believe TILE can be back to north of $20 within a year or two. Interface is now one of my top 10 dollar holdings. The next two stocks, which caught my eye last month, were big-cap, blue-chip names, Walgreens Boots Alliance WBA and CVS Health CVS. On Sept. 24, 2020 WBA carved out a new 8-year low, at $33.88. At that price its valuation was more favorable than it was at the exact market bottom on March 9, 2009. Somewhat surprisingly, WBA's September bottom was well below where it fell to during the initial covid-related panic. On April 2, WBA troughed at $39.41. After an early May swoon to near $36.50, WBA rallied as high as $47.88 intraday on June 8. Once again, that rally flamed out giving us the chance to own WBA for south of $34 on Sept 24. That declined actually represented a full bear market move of more than 29% from its June 8 peak. By Thursday, WBA had gained back about 9.4% and still appears exceptionally undervalued. I can easily see it back above $67 by Next September. The stock fetched $74.90 and higher during each of the years 2014 through 2019. At $37.07 WBA yielded 5.07%. CVS Heath's recent round trips are even more enigmatic. The firm is posting all-time record results and expecting further gains in 2021. After bottoming at $52.04 last March, CVS got back to $70.64 in early June. For no apparent reason it then sunk to $56.35 on Sept. 24, a greater than 20% decline on nothing but good news. Rather than cursing its poor performance and horrible chart pattern, I welcomed the chance to back up the truck and buy. At that September low CVS yielded an incredible 3.55% compared with its long-term average yield of 1.87%. There's no reason at all that CVS can't head back to north of $100 within 18 months. These four stocks are just a few of the many bargains now available to those willing to buy before the crowd gets wise and momentum turns decidedly positive. Never be afraid to buy when your data show fair values well above current quotes. Timing on the rebounds is hard to predict but regression to the mean, on shares with two to three standard deviation discounts almost always take place if you have reasonable time horizons. For me that period stretches out a year to 18 months from date of purchase. Early in the day on June 9 all four of these stocks were up a bit more from their previous day's prices.

Giving Stocks a Second Chance Can Lead to Handsome Rewards

Here I show how my current favorite stocks gave us second chances -- even after good-sized earlier rebounds from their March 2020 lows.

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