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5 Stocks to Buy on China Rate Cut

David Bartosiak


Congratulations! You’ve survived the Great China Market Scare of 2015! Here’s your patch to wear as a badge of honor. You can put in right next to your “Greek Bailout Crysis”, “Flash Crash”, “Grexit”, “Government Shutdown”, and “Great Recession” patches. Some of you have been around long enough to have a “Dot Com Bubble”, “Savings and Loan” and even an “October 1987” patch.

Whatever your rank in the grand fraternity of stock market investors is, no doubt you’ve been through some bumps and bruises. This time is different? Probably not. Sure the actors change but the characters remain the same. You’ve got a heel and a hero. In this case, the heel is the Chinese Stock Market and the unlikely hero last night was the People’s Bank of China.

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After the Shanghai stock market tumbled again, dropping 40% from its peak, Beijing launched stimulus measure to boost the economy and the market. Also, a 25 basis point but in the one-year lending rate to 4.6% and a matching drop in the one-year deposit rate down to 1.75% along with the required reserve ration being lowered by 50 basis points for all banks to cover funding gaps.

That’s in the rear view mirror now and what we have is a stock market that’s on fire. After being down as much as a 1,000 points yesterday, the Dow has roared back off the lows and the NASDAQ has already put on 3.2% intraday. After trading as low as 4,292 yesterday morning, the NASDAQ is back to 4,675 and the best is yet to come.

If you’re looking for the best stocks to buy on the Chinese rate cut, you need to find quality names that have shown strength relative to the rest of the market and their peers. These stocks are Zacks Rank #1 (Strong Buy) stocks that also have a Momentum Style Score of “A.” This way, you get the undeniable strength of the Zacks Rank coupled with awesome price momentum. I’ve done the leg work for you here so you don’t have to.

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Lendingtree (TREE)

LendingTree, Inc. is an online lending exchange, providing a marketplace that connects consumers with multiple lenders that compete for their business. It provides access to mortgages and refinance loans, home equity loans/lines of credit, auto loans, personal loans and credit cards. LendingTree also provides brokerage that matches residential home buyers interested in newly constructed homes with builders. The Company's brands include LendingTree, GetSmart, LendingTree Education, LendingTree Autos, LendingTree Home Pros, and InsuranceTree. 

When you sit down and look at stocks that have had recent earnings beats that resulted in stocks gapping higher, you’ll note that the recent market activity only eliminated the run up after the gap that most of these stocks had enjoyed. That’s the case with Lending Tree and a few other stocks on this list. Basically you can look at this as having another chance to buy after missing the post earnings drift the first time around.

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Skechers (SKX)

Skechers U.S.A., Inc. designs and markets branded contemporary casual, active, rugged and lifestyle footwear for men, women and children. The company sells its products to department stores such as Nordstrom, Macy's, Dillards, Robinson's-May and JC Penney and specialty retailers such as Genesco's Journeys and Jarman chains, The Venator Group's Foot Locker and Lady Foot Locker chains, Pacific Sunwear and Footaction U.S.A.

Shares of Skechers have been on a rampage all year. The last huge earnings beat saw the stock jump through resistance at $130 to new highs above $170. It shares a very similar patter to TAST where the stock has now come back to pre-earnings levels and is very close to the 21-day moving average. An extremely oversold commodity channel index only confirms my bullish lean.

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Carrols Restaurant Group (TAST)

CARROLS RESTAURANT GROUP, INC., operating through its subsidiaries, including Carrols Corporation, is one of the largest restaurant companies in the United States. The Company operates three restaurant brands in the quick-casual and quick-service restaurant segments with over five hundred company-owned and operated restaurants in 16 states, and several franchised restaurants in the United States, Puerto Rico and Ecuador. Carrols Restaurant Group owns and operates two Hispanic Brand restaurants, Pollo Tropical and Taco Cabana. It is also the largest Burger King franchisee, based on number of restaurants, and has operated Burger King restaurants since 1976.

Carrols Restaurant Group held up relatively well during the downturn. Following up on a solid earnings report that catapulted shares through $11 to nearly $13, shares dipped with the market but barely broke below $11. Even the 21-day moving average was barely broken as yesterday it sat at $11.46. This sort of strength in a market this week is very rare.

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Mobileye (MBLY)

Mobileye N.V. engages in designing and developing software and related technologies for camera-based advanced driver assistance systems. The company offers software algorithms and EyeQ chips that perform detailed interpretations of the visual field to anticipate possible collisions with other vehicles, pedestrians, cyclists, animals, debris, and other obstacles; and detect roadway markings, such as lanes, road boundaries, barriers, and related items, as well as identify and read traffic signs and traffic lights.

It got downright U G L Y for shares of MBLY the last several days. After breaking through to a new 52-week high over $64 the pressure of the market came down out it. During the rout yesterday, shares dipped all the way down to $42, but wound up finishing the day at $52.45. I look for this stock to make new highs in the very short term.

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Amedisys Inc (AMED)

Amedisys, Inc. is a leading multi-regional provider of home health care nursing services. They operate home care nursing offices in southern and southeastern United States.

Shares of AMED rallied from the mid-$20s to $48 in just over three months. Positive earnings estimate revisions along the way fueled the bullish behavior. The market going south over the last few days presented a fantastic buying opportunity as shares dipped down below $37.

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Bottom Line

You’ve been here before. You’ve been around long enough to know that this is one of the best buying opportunities we’ve seen in a very long time. Make sure you keep history on your side. Be a seasoned vet, use the proven power of the Zacks Rank and make smart buying decisions today.

Be sure to click FOLLOW THE AUTHOR above to stay on top of all the hot momentum stocks at Zacks.com. David Bartosiak is the Momentum Stock Strategist with Zacks and editor of the Momentum Trader.Twitter @bartosiastics


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LENDINGTREE INC (TREE): Free Stock Analysis Report
CARROLS RESTRNT (TAST): Free Stock Analysis Report
SKECHERS USA-A (SKX): Free Stock Analysis Report
MOBILEYE NV (MBLY): Free Stock Analysis Report
AMEDISYS INC (AMED): Free Stock Analysis Report
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