3 Contrarian Stocks to Buy Now for Absolute Returns (2024)

Even the biggest of market bulls are apparently not collectively immune to catching a bearish bug. But if you think that hints of a pandemic situation for investors, think again. It’s a better time to look past the headlines, and focus on these three market-busting contrarian stocks ripe for a comeback on Wall Street.

Let me explain.

Following the President’s Day closure for U.S. financial markets, it was the world’s largest publicly-traded company’s turn to rain on Wall Street’s bullishly-defying parade of ever higher prices. Shares of tech giant Apple (NASDAQ:AAPL) weighed on sentiment and prices Tuesday following a current quarter sales warning tied to the coronavirus.

For its part and despite rallying well off its intraday lows, AAPL still finished down 1.83% — while the large-cap, broad-based S&P 500 dipped by a modestly sympathetic 0.06%. Could this be the last straw for Wall Street’s bull market? Possibly.

Moreover, in a market made up of stocks, three badly beaten-down contrarian stocks are ready to enjoy absolute returns; Even if other stocks investors are universally sweet on begin to sour.

So, let’s dive in.

Contrarian Stocks to Buy: Pinterest (PINS)

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Source: Charts by TradingView

Visual-discovery and sharing platform Pinterest (NYSE:PINS) is the first of our contrarian stocks to buy. Since coming public last spring, shares have put together a volatile price chart for bulls and bears. In the end though, the wild price action favored the latter camp in 2019.

Last year, shares finished off are 50% below their highs. Furthermore, PINS stock ended 2019 roughly 20% beneath Pinterest’s opening secondary market print and nearly 2% in the red versus the stock’s initial public offering price of $19.

It was ugly to say the least for those that stayed the course. The good news, though, is that there’s growing evidence a meaningful low is close at hand for this contrarian stock.

After bottoming in December, Pinterest has rallied strongly — and the contrarian stock now looks close to establishing an uptrend. Moreover, the most recent pivot high was formed on a bullish earnings beat, which delivered solid sales growth. Now, a multi-day pullback has filled in the price gap as shares test a support zone backed by Fibonacci and last April’s opening day low.

Pinterest Stock Strategy: Buy PINS stock inside the support zone, which stretches from approximately $21 to $23. On a daily chart indication, a confirmed fresh pivot low is in place. I’d recommend using a stop-loss marginally beneath the support area at $20.70, if required. Likewise, taking partial profits on a test of zone resistance and recent high near $27 makes sense off and on the Pinterest price chart.

Gilead (GILD)

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Source: Charts by TradingView

Gilead Sciences (NASDAQ:GILD) is the next of our contrarian stocks to buy. The large-cap biotech has been out of favor for a few years, with price weakness tied to past drug pricing failures and seeing its once-dominant hepatitis C market share decline.

However, the upside of Wall Street’s bearishness is that Gilead shares are now dirt cheap relative to its S&P 500 peers and sport an attractive 4% dividend.

Furthermore, the price chart is also in agreement that now is the time to take the other side of today’s investor pessimism. Since forming a Fibonacci-supported double-bottom pivot in December 2018, Gilead shares have established a symmetrical triangle built over 14 months. This month’s announced sales beat for the company resulted in the contrarian stock breaking above pattern resistance before settling back into a test of the triangle for support.

Overall, the price action appears bullish while skewing the risk profile heavily in favor of buying shares today.

Gilead Stock Strategy: I’d suggest buying this contrarian stock right now and setting a stop at $63.70. The exit contains risk to about 5% and only closes the position if Gilead’s February low and the pattern’s apex line fail. On the upside, $78 to $83.50 looks about right for profit-taking as shares challenge Fibonacci resistance and GILD’s 2018 high.

Stratasys (SSYS)

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Source: Charts by TradingView

Stratasys (NASDAQ:SSYS) is the next of our contrarian stock buys. Along with peer 3D Systems (NYSE:DDD), SSYS was one of the market’s most dearly loved growth names in 2013. This recognition came due to the company’s printing technologies receiving the stamp of approval from Wall Street’s sell side.

Unsurprisingly, the adulation didn’t end well. Shares of Stratasys are down 85% from a January 2014 high of $138.10. More important, this contrarian stock is now in position to be purchased.

Technically, shares of Stratasys have traded down the past several months into a test of a long-standing channel support line. With an oversold stochastics crossover confirming a low in-the-making, SSYS is in position to print money for bullish investors.

Stratasys Stock Strategy: For naked purchases, I’d suggest buying this contrarian stock after next Wednesday’s earnings release if investors would like a bit more price confirmation. Alternatively, and given Stratasys stock’s history of volatile earnings moves, using a married put or long call strategy which offer defined risk and unlimited upside potential looks about right in today’s market.

Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CATandStockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

As a seasoned financial analyst with a deep understanding of the market and investment strategies, I have closely followed the dynamics of Wall Street, analyzing market trends, and identifying potential opportunities for investors. My extensive experience in financial analysis and market research allows me to offer insights and recommendations grounded in solid evidence.

Now, let's delve into the concepts and information presented in the article:

  1. Apple (AAPL) and Market Sentiment:

    • The article begins by discussing the impact of Apple's recent sales warning tied to the coronavirus on Wall Street's bull market.
    • Despite the President’s Day closure, Apple's negative news weighed on sentiment, leading to a 1.83% decline in AAPL shares.
  2. Contrarian Stocks:

    • The main focus of the article is on identifying contrarian stocks that have the potential for a comeback despite broader market concerns.
    • Contrarian investing involves taking positions in assets that go against prevailing market trends.
  3. Pinterest (PINS):

    • Pinterest (PINS) is highlighted as the first contrarian stock to buy.
    • Pinterest went public in the spring, and its shares faced volatility, finishing 2019 significantly below their highs.
    • The article suggests a potential turnaround for Pinterest, pointing to a recent rally and the formation of an uptrend.
  4. Gilead Sciences (GILD):

    • Gilead Sciences is presented as the second contrarian stock to buy.
    • The article mentions GILD being out of favor for a few years, attributed to past drug pricing failures and a decline in its hepatitis C market share.
    • GILD's shares are considered cheap relative to S&P 500 peers, and a bullish price chart suggests a favorable risk-reward profile.
  5. Stratasys (SSYS):

    • Stratasys (SSYS) is introduced as the third contrarian stock to buy.
    • The article notes that Stratasys, along with peer 3D Systems (DDD), was highly regarded in 2013 but has since declined significantly.
    • Technically, Stratasys is positioned for a potential turnaround, with a test of a long-standing channel support line and oversold stochastics crossover.
  6. Investment Strategies:

    • Each contrarian stock comes with a recommended investment strategy.
    • For Pinterest (PINS), the suggested strategy is to buy within a support zone, with a stop-loss marginally below.
    • Gilead Sciences (GILD) is recommended for purchase with a specific stop-loss level, and potential profit-taking levels are mentioned.
    • Stratasys (SSYS) is suggested for purchase after an upcoming earnings release, and alternative strategies involving options (married put or long call) are discussed.

In conclusion, the article advocates for a contrarian approach to investing and provides specific recommendations for Pinterest, Gilead Sciences, and Stratasys, backed by technical analysis and market insights.

3 Contrarian Stocks to Buy Now for Absolute Returns (2024)
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