Some investors prefer to focus on a company's fundamentals while others' like to dive into the charts. There are certainly merits to both approaches and either way effective due diligence can lead to profits.
Better yet, sometimes a combination of both analytical techniques can help strengthen an investment thesis on a stock. Here we take a look at three recent charts that have formed bullish technical patterns—and the companies behind them have favorable fundamental underpinnings.
What Does HollyFrontier's Chart Show?
Early last week the daily price chart for HollyFrontier (NYSE:HFC) formed a bottom triangle pattern. This intermediate term bullish pattern points to the stock's possible run to the $41 to $44 range over the next two to three months. If it comes to fruition, it will represent about 50% upside from current levels.
In addition to the bullish technical picture, HollyFrontier has an improving fundamental landscape. The petroleum refining company owns five refineries across Kansas, Oklahoma, New Mexico, and Wyoming. While margins remain low due to depressed oil demand, they are picking up steam in recent quarters.
As the year goes on and pandemic conditions moderate, gradually increasing demand for gasoline and diesel fuel is expected to drive a greater need for HollyFrontier's refining services. This year's late spring and summer driving seasons will have a lot to say about just how much pent-up travel demand people have and to what extent the trucking industry is operating. A recovery in refining volumes should benefit HollyFrontier better than most of its competitors given that the company's assets are of the high quality, low-cost variety.
In the meantime, HollyFrontier has the financial health to continue to help it through the challenging times. It sits on more than $1.5 billion of cash and has access to an additional $1.4 billion credit facility through next year. The refiner's 5.1% dividend yield, positioning for a demand rebound, and recent chart formation, together make it an intriguing near-term energy play.
Is SpartanNash Stock a Good Defensive Investment?
Last week SpartanNash (NASDAQ:SPTN) flashed several bullish moving average crossovers and chart patterns. On January 25th, the chart formed a diamond bottom pattern that could push the stock past the $20 mark within the next few weeks. This was not to be outdone by a similarly bullish pattern that appeared on the daily chart the next day. This was a double bottom formation that suggested the stock is heading toward $21 by next month.
With SpartanNash shares trading around $18, these wouldn't be earth shattering moves, but for a low volatility food distribution company, they would actually be pretty significant. Consistent with the overall market trend, SpartanNash has been more volatile than usual in recent days and appears to be gearing up for a bigger run.
Like its food distribution peers, SpartanNash is a defensive investment but it operates a different type of business. Its main focus is on serving U.S. military commissaries and exchanges. It also distributes food to smaller, independent retail locations in the U.S., Puerto Rico, Cuba, and parts of Europe and the Middle East. Last, it operates its own chain of cleverly named supermarkets such as No Frills and Bag 'n Save.
Granted, even with its unique military niche and unusual distribution network, SpartanNash still operates in the notoriously low margin grocery business. But for traders looking for a relatively low risk way to capitalize on a steady business with bullish chart patterns, SpartanNash offers a no frills way to make a quick buck.
What Can Push Dropbox Higher?
Finally, we come to Dropbox (NASDAQ:DBX). Last week the stock got a nice bounce off its 50-day moving average on a day when more than twice the average amount of shares traded hands. The stock has since pulled back to the 50-day support line in declining volume offering another chance for investors to jump in.
Meanwhile, the mid week surge prompted a bullish continuation wedge pattern. This classic chart pattern suggests that the bulls are in control of Dropbox and that the stock may be ready to resume the prior uptrend which took hold in November 2020. If the continuation wedge holds true to form, Dropbox could be heading to at least $26 by the end of this month. It could therefore be a fast way to bank a 10% February gain.
Along the way, Dropbox's third quarter earnings report slated for February 18th will likely go a long way in confirming or refuting the bullish pattern. But with the company coming off a strong Q2 report when it flipped from a net loss to a profit, it appears to have the momentum for another top and bottom-line beat. And if history repeats, Dropbox stock could jump substantially higher at this time.
Behind the recent momentum is increasing interest in Dropbox collaboration software from companies operating remote workforces. The classic freemium subscription model has appealed to organizations across many industries and has led to a growing customer base of more than 600 million users across nearly 200 countries.
Dropbox is still a long-term growth story with plenty of room to spread awareness of its smart workspace solutions across verticals and geographies. But in the near term, the chart points to a potential burst ahead if the bulls can continue to assert their leadership. So, whether, as a short-term technical play or a long-term fundamental investment, dropping some cash into Dropbox stock looks like a winning move.
Featured Article: Investing in Blue-Chip Stocks7 Low-Priced Dividend Stocks Under $10
The recent trading activity surrounding low-priced stocks like GameStop (NYSE:GME) is a reminder to investors of the high-risk nature involved with these stocks. Often when a stock trades for under $10 (also termed a penny stock), it is trading that low for a reason. The company may not be profitable, or in the case of GameStop, it finds itself with a business model that no longer fits with consumer trends.
But that’s not always the case. It is possible to find low-priced stocks, even penny stocks, that offer great value. This is particularly true if the stock offers investors a dividend. Dividend-earning stocks are a diversification source for a consumer’s portfolio, particularly if the dividend gets reinvested. It’s literally like paying yourself for owning the stock.
And the stocks in this presentation look ready also to deliver some additional stock price growth that can increase your total return.
View the "7 Low-Priced Dividend Stocks Under $10"
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