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Three stocks to buy with the Fed split on rates, traders say

VIDEO4:0804:08
Three stocks to buy on Fed rate uncertainty

Fed week kicks into high gear Thursday.

Members of the Federal Reserve are convening for their annual economic policy symposium in Jackson Hole, Wyoming, until Saturday to discuss monetary policy and financial markets.

But any clarity out of Jackson Hole has been muddied by indications the Fed is more split than united on policy. Meeting minutes out Wednesday afternoon showed the July cut was a "recalibration" rather than a "pre-set course" for future action, though some members had called for an even more aggressive move.

Kansas City Fed President Esther George said Thursday that she did not see the July rate cut as necessary. She told CNBC that "we've added accommodation, and it wasn't required in my view."

As the Fed's path becomes murkier, Mark Newton of Newton Advisors has some ideas on where to put money to work.

"One is Twitter, the social media stock that has underperformed pretty dramatically over the last five years. You're starting to see real evidence of this basing and playing some mean reversion catch-up of late," said Newton on CNBC's "Trading Nation" on Wednesday. "The stock broke out in late July at a time when many of the other stocks were peaking in the market."

Newton says momentum behind it has not yet become overbought, and the stock could play catch-up all the way up to $47.79. That implies 12% upside from current levels.

He also likes Merck, which he calls one of his favorite "large-cap pharma stocks."

"This had made a breakout of over a 16-year base," said Newton. "The stock has had a heck of a run. It's up about 25% since [this time last year], but really no meaningful resistance up until about $91.50, which were the highs that were made almost 20 years ago."

A move to $91.50 represents a 5% rally higher for Merck.

Mark Tepper, president of Strategic Wealth Partners, says with yields so low right now, it makes sense to hide out in a high-yield play.

"Focus on high-quality names, and one that I like is Verizon," said Tepper. "One hundred percent of their business is U.S.-based, so global macro issues really don't affect them as much. They're pumping out free cash flow like clockwork, they're paying a 4.3% yield, which is more than twice what you're getting in the S&P 500, and it's cheap."

Verizon trades at 12 times forward earnings, below the nearly 17 times multiple on the S&P 500.

Disclosure: Strategic Wealth Partners holds Verizon. Newton Advisors owns Twitter and Merck.

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