Stock Picks: General Motors and Everest RE Group

The S&P 500 (SPX) appears to have filled the gap between 2,695.68 and 2,709.79 on the daily chart as the index went as high as 2,717.49 on April 18. However, it seems that SPX has generated another lower high. Unless the index can move above 2,720 soon, it is in danger of creating a bearish descending triangle pattern.

With the SPX showing signs of weakness, let’s look at stocks that are near firm support levels.

GM – General Motors Company

General Motors Company (GM) is an American multinational corporation that designs, builds, and sells cars, trucks, crossovers, and automobile parts. Founded in 1908, it now has 180,000 employees across 35 countries worldwide. The company’s operational segments include GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and General Motors Financial Company, Inc. (GM Financial). In General Motors’ portfolio are the brands Buick, Cadillac, Chevrolet, GMC, Holden, and Wuling.

Technical analysis show that GM has taken out resistance of 37 on September 8, 2017 and triggered the inverse head and shoulders reversal pattern on the weekly chart. The stock went as high as 46.76 on October 24, 2017 and hit the target of the pattern before it retreated and dipped to 34.50 on March 27, 2018.

The stock, however, has recently reclaimed 37. As long as that level holds, the large cup and handle pattern on the weekly chart is still in play.

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of GM is 21.35. While the PE ratio looks as if the stock is already fairly valued, its five-year maximum shows that it has still room to grow. GM’s maximum TTM PE ratio in the last five years was 32.18. Based on this number, we can say that GM has some more upside potential.

The strategy is to buy as close to 37 as possible. If bulls continue to hold this level, they may create a base and crawl to our target of 54. The process may take more than a year.

Weekly GM Chart

Monthly GM Chart

As of this writing, the General Motors Company stock is trading at 37.61.

Summary of Strategy

Buy: As close to 37 as possible.

Target: 54

Stop: 34.50

RE – Everest RE Group Limited

Everest Re Group (RE) is a company engaged in insurance and reinsurance underwriting. Founded in 1973, its products now range from property and casualty reinsurance to marine, aviation, surety, errors and omissions liability (E&O), directors’ and officers’ liability (D&O), medical malpractice, accident and health (A&H), and workers’ compensation insurance.

Technical analysis show that RE bottomed out in December 2017 when it dropped to 208.81. The stock has been rallying since and has even managed to go as high as 264.88 on March 21, 2018. Bears repelled the advance, but the stock appears to be carving a bullish higher low setup above 240. If this level holds, RE may use it to take out 265 resistance.

Moreover, fundamental analysis show that RE’s trailing twelve months (TTM) PE ratio stands at 22.13. This looks like a reasonable PE ratio but it’s five-year maximum of 38.36 indicates that investors are willing to pay a premium. In other words, RE has some more potential for growth.

The strategy is to buy at current market level. If the stock holds the higher low of 241.80, bulls will likely use it to create a base and breach 265 resistance. Once breakout is complete, the stock may march to our target of 320.

The process may take more than a year.

Daily RE Chart

Weekly RE Chart

As of this writing, the Everest RE Group Limited stock is trading 246.99.

Summary of Strategy

Buy: At current market price of 246.99.

Target: 320

Stop: 241.80

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.