3 Stocks Ready to Run in December

Drugmaker Halozyme Therapeutics, Inc. (NASDAQ:HALO), tech titan Honeywell International Inc. (NYSE:HON), and software issue Red Hat Inc (NYSE:RHT) are historically top performers in December

by Alex Eppstein

Published on Dec 1, 2015 at 2:53 PM

With December kicking off today, we wanted to repeat our normal exercise of looking at stocks that have historically outperformed during a given month. This is really saying something, considering December is traditionally one of the best-performing months on the calendar.

Schaeffer's Senior Quantitative Analyst Rocky White crunched the numbers, and the fruits of his labor are summarized in the chart immediately below. Beneath it, I delve a little bit deeper into three of those outperformers: drugmaker Halozyme Therapeutics, Inc. (NASDAQ:HALO), tech titan Honeywell International Inc. (NYSE:HON), and software issue Red Hat Inc (NYSE:RHT).

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Halozyme Therapeutics, Inc. (NASDAQ:HALO)

HALO has traditionally put on a clinic in December. In nine of the past 10 years, the stock has posted a monthly gain, with an average return of 25.5%. Of course, as you can see below, the key to that incredible number was a 178.6% jump in December 2006. HALO is certainly no stranger to outsized gains. In 2015 alone, the shares have tacked on 80% to trade at $17.41.

Another breakout December could put HALO bears on notice. For example, nearly 17% of the stock's float is sold short, representing almost two weeks' worth of pent-up buying power, at average volumes. What's more, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.50 ranks higher than 83% of all readings from the prior year. A capitulation among these doubters could add fuel to HALO's fire.

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Honeywell International Inc. (NYSE:HON)

HON has finished higher in every single December, going back a decade, and the stock has typically advanced about 5%. Should history repeat itself, the shares -- currently perched at $104.07 -- will topple their record high of $107.41 from early August, and build on an already-impressive 10% quarter-to-date return.

What's more, a capitulation among option bears could result in additional tailwinds. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HON's 10-day put/call volume ratio of 1.87 sits just 13 percentage points from a 52-week peak. Echoing this, the stock's SOIR of 1.35 outstrips 98% of comparable readings from the last year.

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Red Hat Inc (NYSE:RHT)

Finally, RHT has powered higher in nine of the past 10 Decembers, with an average return of 13.6%. Last year, the stock's single-month gain came in at a gaudy 11.3%. That end-of-year momentum fed into 2015, during which RHT has tacked on nearly 19% to trade around $82.18 -- just a chip-shot from an early November 15-year peak of $83.

If past is precedent, option bears could soon be sent packing. During the past 10 weeks at the ISE, CBOE, and PHLX, the stock has amassed a put/call volume ratio of 0.66 -- in the 79th percentile of its annual range. Likewise, RHT's SOIR of 0.76 is located above 88% of comparable readings taken in the past year -- an ideal set-up, from a contrarian perspective.

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