Should These 3 Stocks Be Avoided in the Fourth Quarter?

MannKind Corporation (NASDAQ:MNKD), VIVUS, Inc. (NASDAQ:VVUS), and Cirrus Logic, Inc. (NASDAQ:CRUS) have turned in historically dismal fourth-quarter performances over the past decade

Oct 7, 2015 at 2:29 PM
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Despite a volatile start to the fourth quarter, the S&P 500 Index (SPX) is enjoying a solid 3.5% gain -- thanks in part to the notable milestone it recently notched. While Schaeffer's Senior Quantitative Analyst Rocky White uncovered 25 stocks that tend to outperform along with the broad-market barometer in the final three months of the year, he also ran the numbers on those names that have historically proven themselves as fourth-quarter laggards. Three stocks finding an unenviable place on the list are drugmakers MannKind Corporation (NASDAQ:MNKD) and VIVUS, Inc. (NASDAQ:VVUS), as well as integrated circuit specialist Cirrus Logic, Inc. (NASDAQ:CRUS).

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MNKD has shed more than two-fifths of its value in 2015. In fact, the shares hit a two-year low of $2.98 last Friday, and were last seen lingering near $3.08. The stock could be poised to extend these losses, should history repeat itself. In the past 10 fourth quarters, MNKD has averaged a loss of 12.6%, and has been positive just once.

Despite these technical difficulties, option traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open eight calls for each put over the past two weeks. Considering a brow-raising 47.3% of MannKind Corporation's float is sold short, a portion of this activity could be of the protective kind

In August, VVUS tagged its lowest perch on record, at $0.94. Since then, the shares have roughly doubled. Today, in fact, the equity is up 11.3% at $1.91 amid no apparent news, but has encountered an overhead ceiling in the form of its 120-day moving average.

Meanwhile, if past is precedent, the security may be in store for an end-of-year sell-off. Specifically, in the past 10 fourth quarters, VVUS has been positive only three times -- averaging a loss of 5.2%. This would certainly please short sellers, who increased their shorted shares by 5.4% in the latest reporting period. What's more, 39% of VIVUS, Inc.'s float is sold short, or 4.3 times its average daily trading volume.

Unlike MNKD and VVUS, CRUS is boasting an impressive year-to-date gain of 28% to trade at $30.23. Additionally, the stock's recent pullbacks have been contained by the equity's 320-day moving average. However, over the past 10 years, the stock has been positive just 30% of the time in the fourth quarter, averaging a loss of 8.8%.

Option traders have been betting on the stock to buck this historically bearish bias, though. At the ISE, CBOE, and PHLX, Cirrus Logic, Inc.'s 10-day call/put volume ratio of 6.39 sits higher than 78% of all similar readings taken in the past year.
 

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