Stock Picks: Western Digital and Unum Group

The S&P 500 (SPX) ended the week strong as it closed at 2,779.03 on Friday, June 8, 2018. However, we might see the index take a slight dip this week as the daily candle is detached from the 8-day and 21-day moving averages. Nevertheless, SPX appears to be in a good position to go above 2,800 soon.

As the index maintains its bullish sentiment, let’s look at stocks showing signs of strength.

WDC – Western Digital Corporation

Western Digital Corporation (WDC) is an American company that develops, manufactures, and provides data storage devices, solutions, and infrastructure. Founded in 1970 as an integrated circuit maker and a storage products company, the firm is now one of the largest computer hard disk drive manufacturers in the world. They operate in three categories: Datacenter Devices and Solutions, Client Devices and Client Solutions. In their extensive portfolio are the brands G-Technology, HGST, SanDisk, and Tegile, among others.

Technical analysis show that WDC has taken out resistance of 80 in March 2017. This triggered the large rounding bottom reversal pattern on the weekly and monthly charts. Currently, the stock is creating a base above 80 after a false break below the support in April 2018. This can be your chance to buy the breakout.

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of WDC is 6.02.  The stock is undervalued considering that the P/E of the computer storage devices industry is 16.14. Also, the company reported a strong quarter and increased its profitability outlook. This tells us that WDC has some room to grow.

The strategy is to buy as close to 80 as possible. As long as the stock is above this level, bulls have the momentum they need to climb to our target of 110.

The process may take more than three months.

Weekly WDC Chart

Monthly WDC Chart

As of this writing, the Western Digital Corporation stock (WDC) is trading at 82.62.

Summary of Strategy

Buy: As close to 80 as possible.

Target: 110

Stop: Close below 75.

UNM – Unum Group

Unum Group (UNM) is a Fortune 500 insurance company that provides financial protection benefits in the United States and the United Kingdom. Founded in 1848, they now protect around 33 million people in 181,000 companies globally, through benefits solutions aimed at meeting the needs of both employers and employees. Their operational segments include Unum US, Unum UK, Colonial Life, Closed Block and Corporate.

Technical analysis show that UNUM appears ready for a strong bounce play. This view comes after the stock respected the 38.2% Fibonacci level. On top of that, the 4-day, 8-day, and 21-day moving averages are all detached from the weekly candle. This tells us that the drop is not sustainable. Lastly, UNUM is just hovering above oversold conditions on the weekly chart.

Furthermore, fundamental analysis reveal that UNM’s trailing twelve months (TTM) PE ratio stands at 8.554. The stock appears undervalued considering that its five-year maximum is 25.26. Based on these figures, the stock may have some upside potential.

The strategy is to buy as close to 38 as possible. If bulls preserve the support, they may spark a rally to our target of 46.

The process may take three months.

Weekly UNM Chart

Monthly UNM Chart

As of this writing, The Unum Group stock (UNM) is trading at 39.35.

Summary of Strategy

Buy: Buy as close to 38 as possible.

Target: 46

Stop: Close below 37.


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, 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.