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Small-Cap Spotlight: Amedisys Inc, Overstock.com, Inc., and Smith & Wesson Holding Corp (SWHC)

AMED, OSTK, and SWHC are three low-valued stocks offering up contrarian plays

by 8/2/2013 10:39:14 AM
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Small-cap stocks have been silently leading markets higher in 2013, as evidenced by the iShares Russell 2000 Index's (ETF) (NYSEARCA:IWM) 24.6% year-to-date gain. By contrast, the Dow and the S&P 500 Index (SPX) have tacked on a respective 19% and 19.5%. Three lower-priced equities within this outperforming sector that could offer up the potential for some profitable plays include health care concern Amedisys Inc (NASDAQ:AMED), online discount retailer Overstock.com, Inc. (NASDAQ:OSTK), and gun guru Smith & Wesson Holding Corp (NASDAQ:SWHC). As of Thursday's close, the market capitalizations for the companies were perched at $414.6 million, $792.8 million, and $781.9 million, respectively.

Amedisys Inc (NASDAQ:AMED) has tacked on a respectable 23.1% year-to-date. Additionally, the equity has put in a solid performance against the S&P 500 Index (SPX), and has outpaced the broad-market barometer by nearly 22 percentage points throughout the past 60 sessions. A second-quarter bottom-line beat on Wednesday, followed by Thursday's round of bullish brokerage notes, helped push AMED north of the $13 mark. This level served as resistance in late June, but could now be switching roles to provide support.

From a contrarian perspective, the stock may be poised to encounter some additional analyst-related tailwinds in the near term. Of the seven covering analysts, six have smacked AMED with a "hold" or "strong sell" recommendation, plus the consensus 12-month price target of $9.56 stands at a discount to the stock's current perch at $13.91. The equity could meet a fresh wave of buying power, should any of these skeptics follow in the footsteps of Oppenheimer, Credit Suisse, and Deutsche Bank -- who upwardly revised their respective price targets for AMED yesterday.

The technical tenacity of Overstock.com, Inc. (NASDAQ:OSTK) is nothing short of impressive, with the shares more than quadrupling in value during the past 52 weeks. On the charts, the equity took a quick bounce off its 10-week moving average in mid-July, which helped push OSTK to a five-year high of $35.60. The stock has recently consolidated some of these gains to trade at $33.13, but appears to have found a foothold in the $32-$33 region -- a neighborhood that previously served as support in late 2007.

Despite OSTK's withstanding technical prowess, short-term option players have displayed a growing affection toward puts. The stock's Schaeffer's put/call open interest ratio (SOIR) has moved to 0.81 from its July 22 reading of 0.67, as put open interest in the front three-months' series of options jumped almost 24%. What's more, this current ratio ranks in the 92nd percentile of its annual range, pointing to a distinct put-skewed bias in OSTK's near-term options pits. An unwinding of these bearish bets in the face of the stock's continued rise could add further fuel to OSTK's fire.

Another day, another multi-year peak for Smith & Wesson Holding Corp (NASDAQ:SWHC), as the stock flew to the $12.45 mark right out of the gate. Not only is this its fourth fresh intraday high in as many days, but it's the loftiest perch SWHC has touched since November 2007. This strong price action is just more of the same, though, for a stock that's up 46% on the year to linger near $12.44.

Investors remain unconvinced of SWHC's ability to sustain this upward momentum, though. Case in point -- short sellers increased their bearish exposure by more than 19% during the last two reporting periods. Short interest now accounts for a lofty 21% of the equity's available float, or more than five days' worth of pent-up buying demand -- signaling an ample amount of sideline cash that could be used to spark a short-covering rally.

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