3 of September's Worst Performers

Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), Outerwall Inc (NASDAQ:OUTR), and Meritor Inc (NYSE:MTOR) tend to struggle in September

by Karee Venema

Published on Aug 27, 2015 at 1:39 PM

August has been a volatile month for the broader equities markets, with the major indexes headed for steep month-to-date losses. Things may only deteriorate in September, which, according to Schaeffer's Senior Quantitative Analyst Rocky White, has historically has been the worst for the S&P 500 Index (SPX) over the past 50 years. While a number of stocks have been known to buck the bearish trend -- these three specifically -- drugmaker Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), kiosk concern Outerwall Inc (NASDAQ:OUTR), and auto parts specialist Meritor Inc (NYSE:MTOR) have turned in some of the worst performances.

SPXSept

Since 2007, ACHN has averaged a loss of 11.9% in September, and has been positive just one-quarter of the time. It's already been a dismal year for the stock, which has shed nearly two-fifths of its value to hover near $7.60 -- and more recently, has been stuck churning below its 320-day moving average since early June.

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In spite of these technical troubles, option traders have been quick to initiate long calls over puts in recent months. ACHN's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 7.56 ranks higher than 64% of all similar readings taken in the past year. (With 21.1% of the equity's float sold short, though, some of these calls could be of the protective kind.)

The brokerage bunch, meanwhile, has taken a glass-half-full approach to ACHN, with five out of eight analysts maintaining a "strong buy" recommendation. What's more, the average 12-month price target of $14.86 stands at a steep 49% premium to current trading levels. Should Achillion Pharmaceuticals, Inc. continue to struggle, an unwinding of optimism among option traders and/or analysts could translate into a fresh round of selling pressure.

Over the past 10 years, OUTR has lost an average of 4.8% in September, and has been positive just one time -- adding 9.6% in 2006. More recently, the security has been struggling since topping out at a record high of $85.26 in late July, down 25% at $63.77.

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Similar to ACHN, call players have been active in recent months. Specifically, OUTR's 50-day ISE/CBOE/PHLX call/put volume ratio of 1.44 sits just 6 percentage points from a 52-week peak. However, more than two-fifths of the security's float is sold short, so it's possible some of the recent call buying -- particularly at out-of-the-money strikes -- is a result of short sellers hedging against any upside.

Elsewhere on the Street, it's more of a mixed bag. For instance, 10 brokerage firms currently follow OUTR -- five of which maintain a "strong buy" recommendation, and five of which deem the stock a "hold" or worse. Meanwhile, the average 12-month price target of $79.71 represents expected upside of 21% to the stock's present perch. Although Outerwall Inc is following in the bullish footsteps of the broader equities market today, a resumed downtrend could prompt downgrades and/or price-target cuts.

Going back 10 Septembers, MTOR has averaged a monthly loss of 4.1%, and is positive just 30% of the time. In fact, last September, the shares plunged more than 20%. A repeat of history would just be more of the same for a stock that's given back 17.3% since notching a three-year peak of $15.65 in early January.

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Unlike its fellow September laggards, sentiment toward MTOR is mostly skewed toward the skeptical side. Short interest, for example, surged 17.6% in the latest reporting period, and now accounts for a healthy 6.9% of the security's available float. This represents more than a week's worth of trading, at average daily levels.

Additionally, seven analysts maintain a lackluster "hold" recommendation toward MTOR, versus two "buy" or better ratings. However, the consensus 12-month price target of $15.57 stands 20% above Meritor Inc's current price of $12.94, leaving the door wide open for a round of downwardly revised price targets.

Here's the entire list of September's 25 worst-performing stocks. To take a look at three stocks that had an outstanding summer, and could continue to see more gains heading into fall, click here.

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