Trading Nation

Out of the five most hated stocks in the S&P 500, one could be a bargain

These are the most hated stocks on Wall Street

One of the five most heavily shorted stocks in the could spell opportunity for contrarian-minded investors.

"We like Discovery," Erin Gibbs, equity chief investment officer at S&P Global, said Thursday on CNBC's "Trading Nation." "We think they are a transitioning company, we do see some potential earnings growth going forward and valuations really are at three-year lows [and have been] very stable, so we really see this as a good buying opportunity for where they are."

Gibbs points out that while the core cable television business has serious secular headwinds, Discovery is "expanding their revenue base" by building a theme park in Costa Rica, partnering with Sony to offer access to its channels on PlayStation's over-the-top television service and integrating European sports network Eurosport, which it fully acquired in 2015.

Of the five names with the highest short interest as a percentage of their available shares, Discovery is the only one that is up on the year. Topping the short-interest list is Under Armour, which has lost a third of its value this year thanks to disappointing earnings results and the departure of its chief financial officer.

Ticker Company Short Int. as % float YTD price ch.
UAAUnder Armour, Class A26.5-33.3
DISCADiscovery Communications, Class A19.37.0
TDGTransDigm Group 18.0-3.6
MURMurphy Oil 17.3-14.0

When asked which of the five he would buy, Evercore ISI's head of technical analysis, Rich Ross, also singles out the media company.

"The charts are with Erin's fundamentals, and I think the technicals suggest that Discovery is actually a long, not a short," Ross said Thursday on "Trading Nation."

"For the last two years, the stock's been forming a very nice rounded base of support that you can see on the chart," he said. "And more importantly, we had this ascending triangle with a pattern of higher lows" which "tends to be a continuation pattern to the upside."

At this point, the stock is "in a strong position" to take out its $29-to-$30 resistance level, "and when it does, it will generate a confirmed buy signal," Ross added. "We like Discovery."