Schaeffer's Trading Floor Blog

Singles Only: 3 Cheap Stocks That Still Look Like Winners

OfficeMax, Hudson City Bancorp, and Golden Star Resources look like bullish trading

by 11/8/2012 9:26 AM
Stocks quoted in this article:

This week has been a volatile one on Wall Street, but there are still trading opportunities to be found, even from a bullish perspective. Three low-priced names that look promising -- despite skepticism on Wall Street -- are OfficeMax Incorporated (NYSE:OMX - 8.17), Hudson City Bancorp, Inc. (NASDAQ:HCBK - 8.25), and Golden Star Resources Ltd. (USA) (NYSEAMEX:GSS - 1.90).

Our Singles Only screen, with data from Finviz.com, found these names and 23 more when searching for outperforming names facing bearish analysts' ratings. The "Avg. Rating" column reflects analysts' collective opinion; a rating of 1.0 means all covering analysts rate the stock a "strong buy," while 5.0 means unanimous "strong sell" ratings.

Table

OMX is fresh from a well-received third-quarter earnings report, where the retailer issued a positive earnings surprise thanks to rising profit and reduced debt liabilities. The shares are now up roughly 80% in 2012 and recently bounded higher from their 40-day moving average to peg a new annual high earlier this week.

Analysts aren't convinced, however, as five of nine firms rating the stock have named it a "hold." What's more, options players have assumed an almost-united bearish front, as evidenced by the stock's 50-day put/call volume ratio measuring buy-to-open activity on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio -- at 1.45, is higher than all but 7% of the past year's readings, suggesting bearish options speculation is approaching a pessimistic peak.

Elsewhere, short sellers have been betting against OMX. Almost 17% of the retailer's float is sold short, and it would take almost nine trading days to cover all existing shorted shares, at the stock's average daily trading volume.

HCBK, meanwhile, has been muscling higher the past three months, gaining nearly 45% since encountering double-bottom support in late July. In 2012, the shares have added about 32%. Additionally, on a relative-strength basis, HCBK has outperformed the S&P 500 Index (SPX) by 26 percentage points during the last three months.

The stock has already exceeded analysts' expectations; the consensus 12-month price target according to Thomson Reuters is $8.12, which is actually below the stock's closing price on Wednesday. What's more, 10 of the 12 analysts rating the stock have issued a "hold" or worse suggestion.

Short-term options players, meanwhile, have crowded the bearish bandwagon. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.80 indicates the number of puts nearly doubles calls in the front three-month series of options. This reading is at an annual high, highlighting a peak in bearish sentiment.

Finally, gold-mining name GSS has risen 15% this year, but is up almost 90% from late July, when it was perched around the $1.00 level. During the last three months, in fact, the stock has outperformed the SPX by 47 percentage points.

The stock is approaching analysts' consensus 12-month price target of $1.93, which could spur some firms to adjust their estimates in a positive direction. Upgrades could also be in the cards, as just one of the six analysts following GSS rates it a "buy."

Meanwhile, short covering could play a role, as short interest grew by 11% during the last month and represents almost 5% of the stock's float. It would currently take more than five trading days for short sellers to clear out of all of their positions, at the stock's typical pace of trading.


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