Schaeffer's Trading Floor Blog

Singles Only: 3 Underloved Outperformers Below $9

Fibria Celulose, Radian Group, and Synovus Financial could see tailwinds ahead

by 9/12/2012 12:52 PM
Stocks quoted in this article:

In our weekly quest for interesting stories on the low-dollar stock front, we found 38 names that look compelling from a contrarian perspective. Three names that stood out after researching other indicators were Brazilian paper company Fibria Celulose S.A. (ADR) (NYSE:FBR - 8.47), insurance company Radian Group Inc. (NYSE:RDN - 4.70), and regional banking name Synovus Financial Corp. (NYSE:SNV - 2.35).

Here's a look at the names a Finviz.com screen discovered when trying to isolate low-priced names that are in positive territory for 2012 but have little support from analysts. The "Avg. Rating" column reflects analysts' opinion; a rating of 1.0 on the scale means all covering analysts rate the stock a "strong buy," and 5.0 means unanimous "strong sell" ratings.

Table

FBR appears set to break out from its downtrend, as the stock recently topped its 50-week moving average for the first time since April 2011. Additionally, FBR has sharply outperformed the broader-market S&P 500 Index (SPX) on a relative-strength basis. During the past three months, in fact, it has outpaced the SPX by more than 23 percentage points.

The international company has relatively scant coverage on Wall Street. Just five analysts rate the stock, only one of whom names it a "strong buy." What's more, investors have taken bearish aim at the company, as evidenced by the fact that 6.2% of the stock's float has been sold short. It would take nearly 12 days -- at FBR's average daily trading volume -- to cover all of these positions, should short sellers decide to rethink their strategy.

RDN is also followed by a small number of analysts -- six, to be precise, with only one naming the stock a "buy" or better. This apathy comes despite an 82% gain in the stock during the past 52 weeks. In a similar vein, the average 12-month target price on RDN is $3.25, sitting well below current levels.

Glancing at the chart, the stock has been surging sharply higher in recent weeks, overtaking its April peak and tagging a new annual high in today's session. In the past three months, the shares have impressively outmatched the SPX by more than 61 percentage points.

Call buyers have taken note of this recent strength, however. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the 10-day call/put volume ratio stands at an impressive 17.84. In short, during the past two weeks, almost 18 RDN calls have been bought to open versus each put. This ratio is higher than two-thirds of the past year's readings.

Unlike the previous names, SNV actually has a number of Wall Street followers. But of the 17 analysts rating the stock, just two have given it a "buy" rating, leaving 15 "holds," "sells," and "strong sells." What's more, the average 12-month price target among analysts is $2.24, which is actually below the stock's current price point. Any shifts in opinion from the analyst crowd could help inspire the bulls.

The stock has gained roughly 75% during the past 52 weeks and recently overcame long-term trendline resistance at its 120-week moving average. What's more, the shares have outperformed the SPX by 19 percentage points during the last three months. Despite this strength, short-term options speculators have shown historical preference for puts. The equity's Schaeffer's put/call open interest ratio (SOIR) stands at 1.08, meaning puts with three months or fewer until expiration narrowly outweigh open calls.

Investors should note that SNV will go ex-dividend on September 18, impacting the stock and options pricing.


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