Schaeffer's Quantitative Analyst Chris Prybal ran a study to determine which stocks tend to perform best during the month of July. Among the names that average at least a 5% gain during the month ahead are alternative energy firm SunPower Corporation (NASDAQ:SPWR), Beijing-based search engine Baidu Inc (ADR) (NASDAQ:BIDU), and nutritional supplements specialist Herbalife Ltd. (NYSE:HLF).
With eight July returns on record, SPWR boasts an average July return of 9.5%, and is positive 88% of the time. A positive performance this month would simply be more of the same for the shares, which have rallied more than 36% so far in 2014 to trade at $40.63.
Given the stock's solid performance, short sellers could soon be forced to admit defeat. Short interest currently accounts for 23.3% of the equity's float, or 4 times its average daily trading volume. Looking ahead, traders should stay tuned to SunPower Corporation's corporate calendar; an official date hasn't yet been confirmed, but the company tends to report its second-quarter results in late July or early August.
As for BIDU, U.S.-traded shares of the tech stock have averaged a gain of 13.8% over the past eight Julys, with 88% positive returns. The bullish historical trend is continuing today, as BIDU earlier tapped a new record high of $190.08, and was last seen up 1.5% at $189.52.
Baidu Inc (ADR) is tentatively expected to announce its second-quarter earnings during the fourth week of July, and speculative players appear to be betting on an upside surprise. During the past 10 days, options traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 2.18 calls for every put on BIDU. Looking back over the past year, calls have been purchased over puts at a faster clip only 21% of the time.
With nine July returns on record, HLF has finished the month higher 78% of the time, racking up an average gain of 9.2%. The stock could use a shot in the arm, as it's currently down nearly 18% year-to-date to trade at $64.71. In fairness, HLF has already recovered a good deal of ground from its March low at $49.35, and is now trading comfortably north of its 40-day moving average.
Traders are heavily bearish toward Herbalife Ltd., with 34.4% of the stock's float sold short, and a 10-day ISE/CBOE/PHLX put/call volume ratio of 6.39 -- in the 100th percentile of its annual range. If the company tops expectations with its second-quarter earnings results after the market closes on Monday, July 28, a capitulation by some of the weaker bearish hands could contribute to another positive monthly performance for HLF.
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