Stock Picks: WMB and WELL

The S&P 500 (SPX) is beginning to slow down as it went as high as 2,790.21 yesterday, June 11, 2018 only to close at 2,782. We continue to expect a slight dip this week to give the 4-day, 8-day, and 21-day moving averages a chance to catch up with the daily candle’s body. Nevertheless, SPX remains bullish so we’ll continue looking for stocks that flash signs of strength.  

WMB – The Williams Companies Incorporated

The Williams Companies, Inc. (WMB) is a Fortune 500 energy infrastructure company involved in natural gas processing, with interstate gas pipeline and gathering & processing operations in the United States, including the Gulf of Mexico, the Rockies, the Pacific Northwest and the Eastern Seaboard. Founded in 1908, the company operates through segments that include Williams Partners and Williams NGL & Petchem Services. Among its subsidiaries are William Pipeline Partners LP, Northwest Pipeline Corporation, Transco Energy Company, Apoc Oil and Gas International, and Bargarth Incorporated.

Technical analysis show that WMB is creating a large cup and handle reversal structure on the weekly chart. This view comes after the pair generated a higher low of 24 in April 2018. The higher low was affirmed by a rally to 28.23 in May. WMB may have taken a slight dip but it now appears ready to resume its ascent. Furthermore, the attachment of the 4-day and 8-day moving averages to the weekly candle supports this sentiment.

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of WMB is 11.38.  Therefore, the stock appears to be undervalued considering that it has a five-year maximum of 114.31 and an average of 44.51. Also, its earnings improved from the prior-year figure of 14 cents to 19 cents per share. Based on these figures, the stock has some room to grow.

The strategy is to buy as close to 26 as possible. As long as the stock is above this level, bulls have the momentum they need to take out resistance of 32 and climb to our target of 50.

The process may take six months.

Weekly WMB Chart

Monthly WMB Chart

As of this writing, The Williams Companies Incorporated stock (WMB) is trading at 26.75.

Summary of Strategy

Buy: As close to 26 as possible.

Target: 50

Stop: Close below 24.

WELL – Welltower Incorporated

Welltower Incorporated (WELL) is a Fortune 1000 Real Estate Investment Trust (REIT) that invests in seniors housing, assisted living and memory care communities, post-acute care facilities, and medical office buildings. Founded in 1970, it now owns interests in properties in the United States, Canada, and the United Kingdom. The company operates in three segments: triple-net, seniors housing operating, and outpatient medical. They include independent and assisted living facilities, care homes and Alzheimer’s/dementia care facilities, and outpatient medical buildings.

Technical analysis show that WELL is poised for a strong bounce play. This view comes after the stock respected the 23.6% Fibonacci level. On top of that, the 4-day, 8-day, and 21-day moving averages are reversing their direction on the weekly chart. This indicates a potential move up.

Lastly, bulls showed up when WELL dropped to support of 50. We can see how the volume on the weekly chart surged when the stock hovered above this level.

Furthermore, fundamental analysis reveal that WELL’s trailing twelve months (TTM) PE ratio stands at 37.13. The stock appears overvalued but it has a five-year average of 65.77 and a maximum of 271.83. Also, its recent earnings report looked promising. Considering these figures, WELL has some upside potential.

The strategy is to buy as close to 57 as possible. If bulls preserve the support, they may spark a bounce to our target of 67.

The process may take three months.

Weekly WELL Chart

Monthly WELL Chart

As of this writing, The Welltower Incorporated stock (WELL) is trading at 58.18.

Summary of Strategy

Buy: Buy as close to 57 as possible.

Target: 67

Stop: Close below 55.


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.