2 Retail Stocks to Watch on Leap Day

Retailers Wal-Mart Stores, Inc. (NYSE:WMT) and Lowe's Companies, Inc. (NYSE:LOW) are among the few stocks that tend to outperform on lead days

by Josh Selway

Published on Feb 26, 2016 at 1:32 PM

Due to astrology or physics or some other subject I didn't pay attention to in school, 2016 is a leap year. This means we magically get an extra day next week -- Monday, Feb. 29. Since 2000, we've had three other leap years -- which makes sense, since they're every four years (or are they?). Unfortunately, according Schaeffer's Senior Quantitative Analyst Rocky White, no stock has posted positive returns on all three leap days since 2000. 

In fact, if we widen the time frame, we can see that the S&P 500 Index (SPX) has underperformed on leap days compared to its single-day "anytime" return, going back to 1928. Specifically, the index has posted an average leap day loss of 0.02%, and has only been positive 37.5% of the time. By comparison, the SPX has averaged a single-day "anytime" gain of 0.03%, and has been positive 53.6% of the time. 

160226Leapday1


However, that doesn't mean we should avoid all stocks on leap day. There have been several stocks that have outperformed on leap days since 2000, including retailers Wal-Mart Stores, Inc. (NYSE:WMT) and Lowe's Companies, Inc. (NYSE:LOW) -- which have each been positive in two of the past three leap days.

WMT has averaged a return of 1.3% in the past three leap days. Although the stock has made some headway since its post-earnings sell-off, the shares are down 2.2% today at $66.58, after earlier losing steam near $68 -- a level that's blocked breakout attempts since mid-August. 

Sentiment wise, the stock has recently been favored by bearish hands. For one, put buying has been more popular than normal, according to Wal-Mart Stores, Inc.'s 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.82, which ranks in the 86th percentile of its annual range. Plus, short interest surged by over 16% during the most recent reporting period.

On the other hand, LOW is up 1% at $69.41, as the shares continue to rise following the company's well-received fourth-quarter earnings results from Wednesday. What's more, LOW recently bounced from its long-term 100-week moving average -- a trendline that has been lifting the shares higher for more than four years. The retail stock's previous leap day experiences have been strong, boasting an average gain of 1.4%. 

Options traders would be just fine with another performance like this. Almost three calls have been bought to open for every put during the past two weeks at the ISE, CBOE, and PHLX, with LOW's 10-day call/put volume ratio of 2.93 topping 85% of all other readings from the past year. Furthermore, Lowe's Companies, Inc.'s Schaeffer's put/call open interest ratio (SOIR) comes in at 0.28 -- an annual low. This means short-term option traders are more call-skewed now than at any other point during the past year. Below, you'll find a list of some of the other best performing stocks of leap days past. 

160226Leadpday2


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earning announcements before it's too late!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The Nevada Discovery That Could Jeopardize Chinese Dominance
Click to continue to advertiser's site.
Puts Popular as GM Stock Rallies
GM puts are all the rage lately
JetBlue Stock Surging Despite Sector Skepticism
J.P. Morgan Securities downgraded JBLU to "neutral" from "overweight"
The Nevada Discovery That Could Jeopardize Chinese Dominance
Click to continue to advertiser's site.