Buyer Beware: November Underperformers

Chesapeake Energy Corporation (NYSE:CHK) and Sarepta Therapeutics Inc (NASDAQ:SRPT) have historically underperformed in November

Oct 30, 2015 at 3:06 PM
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Earlier today, we looked at two stocks with the potential to rally in November, based on historical data. We now turn our attention to a pair of names that have traditionally underperformed over the last decade -- specifically, oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK) and drugmaker Sarepta Therapeutics Inc (NASDAQ:SRPT). Before diving into the details, you can get a quick snapshot of poor-performing November stocks in the chart below, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

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Chesapeake Energy Corporation (NYSE:CHK)

Poor performance seems to be synonymous with CHK. The stock has surrendered 63.6% year-to-date to sit at $7.13, in no small part due to sinking crude prices. If past is prologue, things could get even bloodier next month. The shares have fallen in nine of the past 10 Novembers, with an average loss of 7.4%. In fact, CHK hasn't churned out a positive November since 2006.

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Pressuring the shares lower have been short sellers, who currently control 34% of CHK's total float -- or over 11 days of trading activity, at typical volumes. Continued bearish betting from this group could weigh on the stock going forward, too -- especially if the company comes up shy of estimates next Wednesday morning, when it's slated to report earnings. In the aftermath of August's quarterly event, CHK plummeted 12.1% in the following session -- its third consecutive post-earnings loss.

Sarepta Therapeutics Inc (NASDAQ:SRPT)

SRPT is a long-term outperformer, rallying 67% year-to-date to trade at $24.17. However, since exploring near-two-year highs at $41.97 earlier this month, the stock has shed over 42%, amid concerns that rival BioMarin Pharmaceuticals Inc.'s (NASDAQ:BMRN) DMD drug could get approved before Sarepta's. More tough sledding could be ahead, too, as SRPT has given up ground in eight of the past 10 Novembers, losing 10.6% on average.

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Should SRPT struggle again next month, it's vulnerable to negative analyst attention. Two-thirds of covering brokerage firms rate the stock a "buy" or better. Plus, the equity's average 12-month price target of $45.62 stands in territory not charted in roughly two years. Looking ahead, SRPT will step up to the earnings plate next Thursday morning, and the options market is pricing in a big 10.8% post-event move, based on its near-term at-the-money straddle.

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