3 Stocks Set for an End-of-Year Rally

Nike Inc (NYSE:NKE), Deere & Company (NYSE:DE), and Priceline Group Inc (NASDAQ:PCLN) have turned in strong fourth-quarter performances during the past 10 years

by Karee Venema

Published on Oct 6, 2015 at 1:38 PM
Updated on Jun 24, 2020 at 10:16 AM

It's been quite a start to the fourth quarter, as evidenced by the S&P 500 Index (SPX), which just notched its longest winning streak of the year on Monday. While the SPX appears to be on pace to snap this stretch today, speculators should be encouraged by the broad-market barometer's post-streak returns (as well as its historically strong fourth-quarter showing).

But what about individual equities? Schaeffer's Senior Quantitative Analyst Rocky White ran the numbers to find out which stocks bulls should be keeping an eye on this quarter. Athletic apparel issue Nike Inc (NYSE:NKE), factory equipment specialist Deere & Company (NYSE:DE), and online travel agent Priceline Group Inc (NASDAQ:PCLN) all made the list.

151006best4qstocks

NKE, for example, has been positive in the fourth quarter nine of the past 10 years, averaging a return of 5.1%. The equity has continued this technical tenacity in 2015, tacking on 28%. In fact, the shares hit a record high of $126.49 yesterday, and were last seen lingering near $123.27.

Nevertheless, option traders have been initiating long puts over calls at a faster-than-usual clip in recent months, per NKE's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.06 -- in the 94th annual percentile. While it's possible that some of this put buying may be of the protective kind, an unwinding of the bearish bets could help Nike Inc extend its trek into all-time-high territory.

DE, meanwhile, had a rough start to the fourth quarter, tumbling to a three-year low of $71.85 on Friday. The stock has come out swinging this week, though, after the company announced a tentative six-year agreement with the United Auto Workers (UAW) union, up 6.4% at $78.28. If past is precedent, this momentum could continue into year's end, as well. Specifically, DE has been positive in nine of the past 10 quarters, averaging a return of 11.7%.

The stock could also get a boost, should analysts change their tune. Currently, 14 out of 16 brokerages maintain a "hold" or worse recommendation on Deere & Company, while the average 12-month price target of $80.61 is just a stone's throw away from current trading levels. Another fourth-quarter breakout could prompt a round of upgrades and/or price-target hikes.

After topping out at an all-time high of $1,395 in early August, PCLN pulled back to -- and bounced from -- its 320-day moving average. At last check, the equity was lingering near $1,268.76, and if history is any guide, more upside could be on the immediate horizon. Over the past 10 years, PCLN has been positive in nine fourth quarters, averaging a gain of 13.5%!

On the sentiment front, speculative traders are more put-skewed than usual toward Priceline Group Inc. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.01 ranks in the 75th percentile of its annual range, meaning short-term traders have shown a preference for puts over calls among options set to expire in three months or less.

A Schaeffer's 39th Anniversary Exclusive!

8 Top Stock Picks for 2020

Access your FREE insider report before it's too late!


  
 
 

Partnercenter