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BMO stock chief Brian Belski is bullish because ‘investors are nervous’ and ‘positioned for more downside’ — here are 3 easy ways to apply that contrarian mindset

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BMO stock chief Brian Belski is bullish because ‘investors are nervous’ and ‘positioned for more downside’ — here are 3 easy ways to apply that contrarian mindset
BMO stock chief Brian Belski is bullish because ‘investors are nervous’ and ‘positioned for more downside’ — here are 3 easy ways to apply that contrarian mindset

The S&P 500 just had its worst start to a year since 1939 and investors are in panic mode. But according to BMO Capital Markets’ chief investment strategist Brian Belski, a rebound could be on the horizon.

“I’m bullish. I believe in our companies here in the U.S.,” he says in a recent interview with CNBC. “I will tell you this, that investors are nervous. They are positioned for more downside.”

Sentiment tends to be the lowest right at a market’s bottom. If you share Belski’s view and want to be a contrarian, here are three stocks that BMO Capital Markets finds particularly attractive.

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Microchip Technology (MCHP)

Microchip Technology makes microcontroller, mixed-signal, analog and flash-IP integrated circuits for a wide range of industries. Its solutions are used by more than 120,000 customers around the world.

The semiconductor industry isn’t exactly a market favorite at the moment, and Microchip’s stock price reflects that. Year to date, the shares are down about 24%.

That could give contrarian investors something to think about, given how well Microchip’s core business is doing. In Q1, the company generated record net sales of $1.84 billion, up 25.7% from a year ago. Operating cash flow came in at $747.7 million, also marking a new record.

BMO Capital Markets analyst Ambrish Srivastava has an ‘outperform’ rating on Microchip and a price target of $85 — roughly 32% above where the stock sits today.

HubSpot (HUBS)

As one of the leading providers of customer relationship management software, HubSpot was a market darling in 2020 and most of 2021.

But momentum has taken a sharp turn. Trading at $310 apiece today, the stock is down a staggering 64% from a top of $866 last November. Of course, you’d have a hard time knowing that from its latest earnings report.

In Q1, total revenue grew 41% year over year to $395.6 million, driven by a 42% increase in subscription revenue. HubSpot earned an adjusted net income of 54 cents per diluted share for the quarter, also marking a substantial improvement from the 31 cents earned a year ago.

BMO Capital Markets analyst Keith Bachman recently lowered his price target on HubSpot from $485 to $405. However, he maintained an ‘outperform’ rating on the stock, and the new price target still implies a solid upside of 30%.

Cigna (CI)

Unlike the previous two picks, Cigna shares have held up well in 2022. The healthcare insurance giant is up 10% year to date, substantially outperforming the S&P 500’s double-digit decline.

According to BMO Capital Markets analyst Matt Borsch, the stock could see even more gains ahead. On Monday, Borsch raised his price target on Cigna from $300 to $320 while reiterating an ‘outperform’ rating. The new price target suggests a potential upside of 25%.

Cigna’s business is on the right track. The company added 698,000 customers in Q1, bringing its total medical customer base to 17.8 million.

Revenue grew 7.4% year over year to $44 billion for the quarter, while adjusted income from operations per share increased 27% to $6.01.

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