Schaeffer's Trading Floor Blog
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Analysts are weighing in today on theme park operator SeaWorld Entertainment Inc (NYSE:SEAS), drug maker Tekmira Pharmaceuticals Corporation (NASDAQ:TKMR), and blue chip General Electric Company (NYSE:GE). Here's a quick look at today's brokerage notes on SEAS, TKMR, and GE.

  • SEAS is up 2.3% at $19.09, trimming its year-to-date deficit to 33.6%, after Credit Suisse initiated coverage with an "outperform" rating. Bullish brokerage notes are relatively rare for SeaWorld Entertainment Inc, with just two out of eight analysts offering up "buy" or better opinions. That's likely because the stock has underperformed the broader S&P 500 Index (SPX) by 42 percentage points during the past three months, and last week plummeted to a record low of $17.83 after offering gloomy financial guidance. As such, the stock's 14-day Relative Strength Index (RSI) fell to 19 -- in oversold territory -- suggesting a short-term bounce may have been in the cards.

  • TKMR has advanced 13.6% to $20.43, after Leerink launched coverage with an "outperform" rating and $25 price target. Tekmira Pharmaceuticals Corporation has already added more than 59% in August, and has outpaced the SPX by more than 91 percentage points during the past month, thanks to optimism surrounding its experimental Ebola treatment. It's no surprise, then, to find most analysts already in the bullish camp. In fact, all five of the brokerage firms following TKMR offer up "buy" or better endorsements.

  • GE is flirting with a 1.4% lead at $25.98, after Credit Suisse resumed coverage with an "outperform" rating and $30 price target -- representing territory not charted in six years. However, not everyone on the Street is so optimistic. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.46 sits just 1 percentage point from a 12-month peak. In other words, option buyers have been picking up General Electric Company puts over calls at a near-annual-high clip during the past two weeks.

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Analyst Downgrades: Monster Beverage Corp, NXP Semiconductors NV, and GameStop Corp.

Analysts issued bearish notes on MNST, NXPI, and GME

by 8/18/2014 9:24 AM
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Analysts are downwardly revising their ratings today on drink maker Monster Beverage Corp (NASDAQ:MNST), Netherlands-based NXP Semiconductors NV (NASDAQ:NXPI), and video game retailer GameStop Corp. (NYSE:GME). Here's a quick look at today's bearish brokerage notes on MNST, NXPI, and GME.

  • MNST is poised for a breather, after last week's bull gap inspired by The Coca-Cola Company's (NYSE:KO) fresh stake. In fact, Monster Beverage Corp's 14-day Relative Strength Index (RSI) soared to 87 -- well into overbought territory -- suggesting a short-term pullback may have been in the cards. Not helping matters, though, is a downgrade to "hold" from "buy" at Jefferies, though the brokerage firm also hiked its price target on MNST to $95 from $80. The stock closed last week at $93.49, after notching an all-time high of $94.93 in Friday's session.

  • Goldman Sachs downgraded NXPI to "sell," marking a relatively rare negative note for the semiconductor concern. In fact, NXPI boasts 10 "strong buys" and one "buy" endorsement, compared to one "hold" and not a single "sell" recommendation (until now). Elsewhere, options traders are also turning skeptical. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.47 stands higher than 78% of all other readings from the past year. In other words, option buyers have picked up NXPI puts over calls at a faster-than-usual clip during the past two weeks. NXP Semiconductors NV finished at $63.89 on Friday.

  • Ahead of its turn in the earnings spotlight Thursday night, GME was slapped with a price-target cut to $33 from $34.71 at Benchmark. The stock is off 19.5% year-to-date, and short-term option players have rarely been more put-heavy during the past year. In fact, GameStop Corp.'s Schaeffer's put/call open interest ratio (SOIR) of 3.72 sits just 4 percentage points from an annual peak. However, should the company unveil disappointing earnings later this week, more bearish brokerage attention could follow. Right now, 11 out of 15 analysts offer up "buy" or better ratings. GME finished last week at $39.64.

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Analysts are upwardly revising their ratings today on tech titan Hewlett-Packard Company (NYSE:HPQ), media company CBS Corporation (NYSE:CBS), and drug maker Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). Here's a quick look at today's bullish brokerage notes on HPQ, CBS, and ACHN.

  • Ahead of HPQ's turn in the earnings spotlight Wednesday night, analysts at Monness Crespi Hardt upgraded their opinion of the stock to "buy." Historically, Hewlett-Packard Company has matched or exceeded the Street's per-share profit projections in each of the past eight quarters, resulting in an average one-week post-earnings gain of 2.5% for HPQ. Nevertheless, more than half the analysts following the stock maintain "hold" or "sell" opinions. Should the company once again best earnings expectations, additional upgrades could help HPQ add to its year-to-date lead of 25.3%. On Friday, HPQ finished at $35.07.

  • Evercore added CBS to its "conviction buy" list, and offered up an "overweight" rating on the stock. The shares are no stranger to upbeat analyst attention, though. In fact, CBS Corporation boasts 16 "strong buys" and one "buy" endorsement, compared to three lukewarm "holds" and not a single "sell." Meanwhile, the consensus 12-month price target of $70.31 stands in record-high territory for the shares, and represents expected upside of 17.2% from the security's current perch at $59.99.

  • ACHN is poised to extend Friday's rally, after Deutsche Bank upgraded the stock to "buy" from "hold," and nearly tripled its price target to $17 from $6. A mass exodus of shorts could also propel ACHN higher, as short interest accounts for 26.6% of Achillion Pharmaceuticals, Inc.'s total available float. In fact, at the stock's average daily trading volume, it would take more than six sessions to repurchase all of these pessimistic positions. ACHN settled at $9.25 last week.

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Buzz Stocks: Dollar General Corp., Sensata Technologies, Ingersoll-Rand PLC, and Tesla Motors Inc (TSLA)

Today's stocks to watch in the news include DG, ST, IR, and TSLA

by 8/18/2014 8:52 AM
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Stock futures are pointed solidly higher today, as potentially upbeat developments between Ukraine and Russia help stoke investor sentiment. In company news, here are some stocks to watch today.

  • Dollar General Corp. (NYSE:DG) put in an all-cash bid for rival Family Dollar Stores, Inc. (NYSE:FDO) for roughly $8.95 billion, or $78.50 per share, topping Dollar Tree, Inc.'s (NASDAQ:DLTR) previous per-share offer of $74.50. DG's counter-bid represents a premium of 3.2% to FDO's Friday closing price of $76.06. (MarketWatch)

  • Also on the M&A front, Sensata Technologies Holding N.V. (NYSE:ST) has agreed to purchase tire-sensor issue Schrader from private equity firm Madison Dearborn Partners LLC for roughly $1 billion. Elsewhere, Ingersoll-Rand PLC (NYSE:IR) will acquire Cameron International Corporation's (NYSE:CAM) centrifugal compression arm for around $850 million. (The New York Times; Bloomberg Businessweek)

  • Tesla Motors Inc (NASDAQ:TSLA) said on Friday it will extend the warranty on its Model S sedan, after Consumer Reports last week called into question technical issues surrounding the electric vehicle. The new warranty will increase coverage to eight years and unlimited mileage, matching that of the vehicle's battery pack. (Reuters)

  • Apache Corporation (NYSE:APA) announced a potentially historic discovery in Western Australia after it uncovered an oil field that could hold up to 300 million barrels of crude. The country's crude production has been sliding in recent years, and the last big discovery of 127 million barrels occurred 15 years ago. (The Wall Street Journal)

  • The Food and Drug Administration has approved Biogen Idec Inc's (NASDAQ:BIIB) multiple sclerosis drug Plegridy. The injectable treatment is targeted toward those with relapsing forms of the disease. (CNBC)

  • Elsewhere, JinkoSolar Holding Co., Ltd. (NYSE:JKS) reported earnings. (MarketWatch)

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When It Comes to the VIX, Nothing Is a Sure Thing

While fading VIX-plosions has worked well in the past, there are always exceptions

by 8/18/2014 8:30 AM
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Got this on Twitter the other day, in regards to my recent look at CBOE Volatility Index (VIX) futures:

Hi Adam. Interesting article. You seem to be saying that VIX is always a good short on any pop. Don't you think the low vol regime will end?

To which I replied:

I've never said on any pop, it's ultimately mean reverting, that's all

And he shot back:

True. My takeaway was that selling VIX is a sure win. But someday vol will actually rise and that strategy will blow up.

It then occurred to me that I better clarify my opinion on VIX, and tradable VIX.

Selling VIX (presumably futures, though I suppose it could mean volatility in general) into pops is NOT a sure thing. Nothing is ever a sure thing. Everything I ever write, every data study I ever provide, every chart I ever post all are intended to highlight probabilities, never certainties. Certainties don't exist.

When VIX makes an abrupt lift, it generally will extend enough above a mean where we may seek to derive a signal. I use 20% above the 10-day simple moving average as a general trigger point. But you can use more, or less, or Bollinger Bands, or whatever --it's more about the concept than anything else.

In my humble opinion, that generally becomes a time to look for mean reversion. That is, VIX will stall and stocks (which are presumably in decline) will stabilize.

But importantly, again, that's a probability, not EVER a sure thing. Over the course of time, data suggests that fading VIX-plosions works well over most time frames. There are often exceptions however, as some sell-offs persist, and crashes (however you define one) essentially all start from already-oversold markets.

In more statistical-speak, fading VIX pops will give you a positive expected gain, but you may have to withstand some scary drawdowns along the way.

As to whether I think the current low-volatility regime will end, of course I do. I know not when it ends; we can only answer that in hindsight. Long-term regimes tend to last about four to six years, and we're inexactly a few years into one. So perhaps in a year or so, VIX starts trending up.

It's important to remember, though, that long-term trend changes are, by definition, very rare. And I'm absolutely not going to be the one to declare some future VIX pop THE start of the new regime. I'll let someone else be a hero on that; I'd rather miss the first boat and adjust my strategy going forward from there.

And finally, as to VIX futures, that perpetual upslope in the term structure has proven wrong for the better part of five years now. That lasting VIX rally pretty much hasn't happened. It will someday. But just know that there's no real reason why the curve should slope up as much as it still does. The local, low-volatility regime mean of VIX is in the 16-17 range, depending on how far back you want to go. In my humble opinion, that's a fair level for an out-month VIX future -- not the 18, 19, and even 20 we've seen over the last few years.

But again, that's going to change at some point, too. Someone will absolutely buy a VIX future in the high teens and ride it and sell for a big profit someday. I'm just not prepared or inclined to guess when that happens.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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