3 Top Stocks for February

Priceline Group Inc (NASDAQ:PCLN), Smith & Wesson Holding Corp (NASDAQ:SWHC), and Xilinx, Inc. (NASDAQ:XLNX) have historically outperformed in February

by Karee Venema

Published on Feb 1, 2016 at 2:23 PM
Updated on Jun 24, 2020 at 10:16 AM

Stocks slumped last month, logging their worst January since 2009. While February is taking a page out of history's playbook and is not off to a hot start, not all hope is lost for traders. In fact, according to Schaeffer's Senior Quantitative Analyst Rocky White, a number of stocks tend to put in solid performances in February, including online travel agent Priceline Group Inc (NASDAQ:PCLN), gun guru Smith & Wesson Holding Corp (NASDAQ:SWHC), and integrated circuit specialist Xilinx, Inc. (NASDAQ:XLNX).

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PCLN is 0.8% higher today to $1,073.05, despite yet another bearish brokerage note. Specifically, Cowen and Company lowered its price target on the shares to $1,290 from $1,500. Although the stock struggled along with the broader equities market last month, it managed to maintain a foothold in the $1,010-$1,020 region -- an area that served as support in late 2014 and early 2015.

If past is precedent, PCLN could be poised to extend this bounce. Over the past 10 Februaries, the equity has been positive 100% of the time, averaging a gain of 14.7%. In fact, in 2009, PCLN tacked on 26.5%!

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This potential price action could have option traders cheering. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Priceline Group Inc's 10-day call/put volume ratio of 1.45 rests in the 88th annual percentile. Simply stated, calls have been bought to open over puts at a near-annual-high clip in recent weeks.

SWHC has been charting a path steadily higher over the past 52 weeks, up almost 74% at $21.68. What's more, the equity's most recent consolidation after topping out at a record peak of $26.54 on Jan. 5 was contained in the $19.50-$20 area -- home to its rising 80-day moving average.

Looking back over the past 10 Februaries, SWHC has been positive nine times, boasting an average return of 12.2%. Similar to PCLN, the stock's standout year was 2009, when it posted a February return of 62.3%!

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On the sentiment front, there are plenty of skeptics sitting on the sidelines. Short interest, for example, accounts for more than 13% of SWHC's available float. Plus, one-third of covering analysts maintain a "hold" or "strong sell" suggestion toward the stock. Should Smith & Wesson Holding Corp continue its winning February record, a capitulation from these bearish bettors and/or a round of upgrades could translate into tailwinds.

Since taking a bounce off the $40.44 mark in mid-January, shares of XLNX are up 23% to linger near $49.75. If history has any say in the matter, the security may be able to stage a convincing rally north of the round-number $50 mark -- and into annual-high territory -- in the next several weeks.

In fact, over the past 10 Februaries, XLNX has been positive 90% of the time, returning an average gain of 5%. The most notable rally came in 2014, when the stock jumped 12.5%.

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Additionally, the equity could find a fresh burst of buying power, should analysts continue to upwardly revise their outlooks. Currently, 12 out of 19 brokerages maintain a "hold" or "sell" suggestion. Plus, the average 12-month price target of $49.10 stands at a discount to Xilinx, Inc.'s current trading levels.

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