Stock Picks: Ventas and Verizon

The S&P 500 (SPX) has turned bearish as it took out 2,600 support on Friday, March 23, 2018. The index opened at 2,646.71 and went as high as 2,657.57 before bears flexed their muscles and pushed it down to 2,588.26 at the close. Below 2,600, the next firm support is 2,532.69.

As bears start to extend their territory, let’s look at issues that are hovering above firm support levels.

VTR – Ventas Incorporated

Ventas Incorporated is a a real estate investment trust (REIT) that acquires, develops, and invests in the healthcare industry across the United States, Canada, and the United Kingdom. Incorporated in June 1987, they have since been the leading capital provider of independent and assisted senior living communities, continuing care retirement communities, and communities providing care for patients suffering from Alzheimer’s and dementia.

VTR has been in sideways consolidation after going as high as 73.66 in May 2013 and bottoming out at 48.07 in December 2013. From that point, the stock established firm support and resistance levels of 48 and 72. VTR has been trading in a wide range since, and the recent selling frenzy may allow us to pick the bottom of the range.

Technical analysis show that VTR is near the bottom end of the range. The stock has respected 48 support since January 2012. In addition, VTR is in extreme oversold territory on the weekly chart. You can take advantage of the incoming selling relief, and play for the bounce.

Furthermore, fundamental analysis reveal that VTR’s trailing twelve months (TTM) price to earnings ratio (PE ratio) stands at 12.76. The stock is extremely undervalued because its average PE ratio over the last five years has been 37.74. In essence, this trade appears to be both technically and fundamentally sound.

The strategy is to buy as close to 48 as possible. If bulls preserve this level, the market would likely use it to move to our target of 60 which is the midpoint of the range. We are keeping our target conservative for now given the bearishness of the SPX. The process may take less than three months.

Weekly VTR Chart

Monthly VTR Chart

As of this writing, the Ventas Incorporated stock is trading at 48.01.

Summary of Strategy

Buy: As close to 48 as possible.

Target: 60

Stop: close below 46.8

 

VZ – Verizon Communications Incorporated

Verizon Communications Incorporated is an American multinational telecommunications conglomerate created with the merging of Bell Atlantic Atlantic Corporation and GTE Corporation in June 2000. The company provides communications, information, and entertainment products and services through its wireless and wireline operational segments. Their business markets range from consumers to local government customers, states, educational institutions, and US-based SMEs. Verizon Communications, Inc was ranked as America’s number one network of 2018 in terms of reliability, data, calls, speed, and text by Rootmetrics.

Like VTR, VZ is also in sideways consolidation. The trend started when it hit resistance of 54 in April 2013 and declined to 44 support in October 2015. VZ has been locked in a wide range since. The recent price action may allow us to buy low and sell high.

Technical analysis show that VZ is on its way down to 44 support. However, the stock is still not in oversold territory so there’s a good chance of an overshot. VZ has been breaking below 44 support since 2015 but bulls always manage to take it back. Therefore, it would be best to wait for bulls to defend 44 before placing buy orders.

Also, fundamental analysis reveal that VZ’s PE ratio (TTM) is at 6.289. Over the last five years, the average PE ratio (TTM) has been 26.67. This means that the stock is extremely undervalued. Buying at the support gives you a lot of upside as the price often catches up with the company’s earnings.

The strategy is to buy when bulls preserve 44 support. If the stock continues to respect this level, it will use the support to hit our target of 54. The process may take three months.

Weekly VZ Chart

Monthly VZ Chart

As of this writing, the Verizon Communication Incorporated stock is trading at 46.87.

Summary of Strategy

Buy: After bulls hold on to 44 support.

Target: 54

Stop: 42.80

 

Featured image courtesy of Shutterstock.

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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.