• 3 Under loved Equities making All-Time Highs

    by  • April 3, 2013 5:30 am • Breaking News, Broad Market Analysis, Chartist Corner, Quick Hits • 0 Comments

    This week I’ll discuss a few equities that notched all-time highs recently. You won’t find me talking up Wall Street’s favorite names though, I am going to focus on three equities that are Under loved from a sentiment perspective.

    For starters, lofty levels of short interest on outperforming stocks allow the possibility for a short-covering rally. Moreover, high levels of pessimism from the brokerage bunch leaves the door wide open for a round of upgrades and/or price-target hikes. Additionally, heavy accumulations of near-term put open interest could give these equities a lift, as the bearish bets unwind.


    TSLA – Tesla Motors

    Tesla Motors, Inc. is an electric vehicles and components manufacturer

    • At TSLA’s average daily volume, it would take twenty days of trading to buyback all of these bearish wagers
    • Short Interest has risen 24% in the past three months
    • Put Implied Volatilities relative to calls are at an extreme reflecting increased demand to hedge shares


    CL – Colgate Palmolive

    Colgate-Palmolive is a consumer products company

    • Per Zacks’, 17 of the 21 analysts who rate CL, rate it a Hold or Sell (all-time highs though…)
    • In the April/May/June series of options, there are Four puts per every One call, a multi-year extreme
    • Put Implied Volatilities relative to calls are at an extreme reflecting increased demand to hedge shares
    • Short Interest is up 43% in the past quarter


    NKE – Nike

    NIKE is engaged in the design, development and worldwide marketing and selling of footwear, apparel, equipment, accessories and services

    • 11 of the 17 analysts who cover NKE rate it a HOLD, the most Bearish analyst configuration ever!
    • Despite this Bearish analyst posture, analysts have unanimously raised their earnings estimates going forward
    • There continues to be more Puts open than Calls in all option series
    • Technical support from May 2012 highs coming into play after recent gap


    These candidates have the necessary conditions for (continued) out-performance in the months ahead, based upon the premise that continued strength can cause negative sentiment to evolve into positive price action. I’d also feel more confident owning a name that others shun, especially with strong price action in comparison to a name that everybody already loves.


    Chris Prybal is a Quantitative Analyst who contributes fundamental, technical, and sentiment research as well as analysis to SchaeffersResearch.com. Chris holds a Bachelor’s degree in Finance from the University of Cincinnati and his research has been quoted on Bloomberg TV, CNBC, Barron’s and Forbes Magazine. Chris has analyzed and traded derivatives for over 15 years in addition to his research prowess. Chris can be followed on Twitter @ChrisPrybal


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