While the trade war has sent stocks on a wild ride this week, there are some voices calling for investors to start buying the dip.
“We do have sympathy with some of the tactical market concerns,” said JPMorgan strategists led by Mislav Matejka. “Our core view remains that one should use the prospective weakness as an opportunity to add further, similar to the May experience. We continue to believe that global equities will advance further before the next U.S. recession strikes. We think that the growth-policy trade-off is far better now than it was in 2018.”
CNBC’s Jim Cramer echoed that sentiment earlier this week when he said, “nobody ever made a dime panicking. Take a deep breath, keep your head. Remember that stocks get cheaper as they go lower if there are quality companies behind them. If you slowly buy the stocks of companies with great fundamentals, you’ll be in good shape when the smoke clears.”
“It’s time to go shopping for high quality stocks while you can still get them at a bit of a discount versus where they were trading a week ago,” Cramer said.
“Both IPOs spiked right out of the gate, but once the market got hammered they came right back down. In other words, you’re getting a second bite at the apple,” Cramer said.
Livongo Health, which uses smart devices to help patients manage chronic conditions, has posted some jaw-dropping numbers recently. In its most recent quarter, the company reported total client enrollment gains of 140%, which translated into revenue growth of 157%, up from 122% last year.
When Livongo went public last month, the stock jumped from $28 per share to $40, and then peaked just over $45 last week. As of this writing, the stock is at $36.
“Even here, the stock isn’t cheap, selling for 9 times next year’s sales estimates, but given that it’s growing at a 100% plus clip, I think that’s a justifiable valuation,” Cramer said.
As for Health Catalyst, Cramer says the company has “fabulous financials.”
The cloud-based analytics software company focused on health care providers posted revenue growth of 54% last year, which jumped to 70% in the first quarter of this year.
Health Catalyst went public late last month, debuting at $37.50 per share. The stock surged to nearly $46 within a week, before falling back down around $38. Shares jumped early Friday and are currently at $46.22.
“At these levels, the valuation is practically sane. Health Catalyst trades at less than six times next year’s sales, using my back of the envelope calculations. That’s pretty reasonable for a company with 50% plus revenue growth,” Cramer said.