Buyer Beware: August Underperformers

BHP Billiton Limited (ADR) (NYSE:BHP), Juniper Networks, Inc. (NYSE:JNPR), and Southwest Airlines Co (NYSE:LUV) are among the stocks that have historically struggled in August

by Alex Eppstein

Published on Jul 29, 2015 at 10:55 AM
Updated on Jun 24, 2020 at 10:16 AM

Yesterday, I made a bullish case for this trio of stocks, based on historical performance during the month of August. Today, I'd like to shift my attention to names that have tended to underperform during the month ahead. The three on which I'll key are BHP Billiton Limited (ADR) (NYSE:BHP), Juniper Networks, Inc. (NYSE:JNPR), and Southwest Airlines Co (NYSE:LUV).

Immediately below, you'll find a list of the 32 worst-performing stocks in August, looking back 10 years. The data comes courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. To qualify, each stock had to be positive no more than 20% of the time in the last decade. Below the list is more detailed commentary on the aforementioned stocks -- BHP, JNPR, and LUV.

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BHP Billiton Limited (ADR) (NYSE:BHP)

Historically, mining magnate BHP has been a disappointment in August, positive just 20% of the time in the past decade, and averaging a one-month loss of 2% -- including a 3.5% drop last August. Of course, the shares haven't been any better in 2015, down about 20% at $37.71, and just off their recent multi-year lows in the $36 region.

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Should history repeat itself, BHP call buyers could find themselves heading to the hills, potentially exacerbating selling pressure. Over the last 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has amassed a call/put volume ratio of 2.71 -- in the 98th percentile of its annual range.

Most analysts have already washed their hands of BHP, with two-thirds sporting "hold" or worse ratings. Overnight, in fact, Canaccord Genuity cut its price target on the equity to 1,380P from 1,670P.

Juniper Networks, Inc. (NYSE:JNPR)

JNPR has been impressive on the charts, adding over 21% in 2015 to trade at $27.09. Last week, the stock gapped up to a four-year high of $29.13, following an earnings-induced round of positive analyst atttention. However, if past is prologue, the shares could take a breather next month. During the past 10 Augusts, JNPR has been positive only twice, and posts an average one-month loss of 2.7%.

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A repeat performance would be bad news for option bulls. JNPR's 50-day ISE/CBOE/PHLX call/put volume ratio of 2.27 outranks almost three-quarters of all similar readings taken in the last year. Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.63 sits in the call-skewed 28th annual percentile. A capitulation among these optimists could spell choppy waters ahead.

Southwest Airlines Co (NYSE:LUV)

LUV, too, has posted just two positive Augusts in the last 10 years, averaging a single-month loss of 3%. Of course, a repeat performance would simply add to the stock's longer-term descent. Year-to-date, the shares have surrendered 15% to hover near $35.95, and saw a recent post-earnings rally attempt rejected by their 80-day moving average.

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Should August prove turbulent once again, LUV could fall victim to a round of downgrades. Despite its technical troubles, the stock still boasts nine "strong buy" endorsements, outweighing five "hold" or worse assessments..

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