Look for 'fallen angels' in volatile trading, like PayPal and Uber - DCLA's Sarat Sethi
MOZCO Mateusz Szymanski/iStock Editorial via Getty Images


Analyst Sarat Sethi said Friday that investors should try to identify "fallen angels" during times of volatile trading, companies that have strong long-term prospects but have been hurt by short-term stumbles or have been dragged down by market dynamics.
Speaking to CNBC, the managing partner at DCLA specifically pointed to PayPal (NASDAQ:PYPL) and Uber (NYSE:UBER) as potential opportunities. He said these stocks have already seen sharp drops so far this year, which makes them good ones "to look at now."
Sethi also mentioned Constellation Brands (STZ), which slipped on Thursday after reporting its quarterly results. The beer and wine producer dropped despite Street-beating results, amid concerns about beer trends.
The DCLA analyst added that his firm currently overweights financial names, saying the sector is "discounting a recession." He noted that stocks like Morgan Stanley (MS) and JPMorgan (JPM) are trading at low P/E ratios, while still sporting attractive dividend yields.
"I like them ... on weakness, I would buy more," he said of the financial heavyweights. "If activity starts picking up in the next several quarters, none of that is baked into their earnings."
In defining his "fallen angels," Sethi explained that he was looking for companies with "strong balance sheets, great long-term vision but maybe in the next couple quarters, they're going to be a little soft."
Looking at the broader market, Sethi advised investors to hold steady through the swings that stocks have seen lately. As part of this, he argued against a strategy of moving to the sidelines and attempting to time a bottom.
"If you're invested, stay invested. There's no reason to get out now because timing this is very hard to do," he said.

For an alternative view on one of Sethi's "fallen angels," see why Seeking Alpha contributor Ryan Thomson calls PayPal "still too expensive."