3 Stocks for Your Second-Quarter Watch List

Under Armour Inc (NYSE:UA), Cabot Oil & Gas Corporation (NYSE:COG), and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) have historically turned in strong second-quarter performances during the past 10 years

Mar 31, 2016 at 2:07 PM
facebook twitter linkedin


The first quarter is quickly winding down, with the Dow and the S&P 500 Index (SPX) comfortably on pace to notch quarterly wins. As the stock market carries on amid a historically bullish period, Schaeffer's Senior Quantitative Analyst Rocky White ran the numbers on stocks that have tended to outperform and underperform both in the month of April, as well as the broader second quarter. Three names making the outperforming list based on their quarterly performances over the past 10 years are athletic apparel maker Under Armour Inc (NYSE:UA), energy stock Cabot Oil & Gas Corporation (NYSE:COG), and drugmaker Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).

160331best2qstocks

UA has put in an impressive technical performance since hitting an annual low of $63.23 on Jan. 20, up 35% at $85.43. Plus, a mid-February bull gap filled a bear gap from early January -- and helped UA re-establish a foothold atop the round-number $80 mark. More recently, the equity has been attempting to break out above the $85 region, and another strong second-quarter appearance could give UA an assist. Over the past 10 second quarters, UA has been positive 80% of the time, boasting an average return of 7.7%.

Not everyone is convinced UA can sustain this momentum, though. Short interest, for instance, accounts for 15.4% of the stock's available float, or 11.5 days' worth of pent-up buying demand. What's more, 38% of covering analysts maintain a "hold" or "strong sell" rating toward Under Armour Inc. A capitulation among shorts and/or a round of bullish brokerage notes could create tailwinds for UA.

COG has also been on the mend since bottoming at a three-year low of $14.88 on Jan. 12, jumping nearly 53%. This rally has COG trying to break above the $23, with the stock last seen lingering near $22.72. If past is precedent, the stock could be in a position to retake this overhead mark. Specifically, COG has turned in a positive performance in nine of the past 10 second quarters, averaging a return of 12.4%.

Meanwhile, in the options pits, short-term speculators have rarely been as put-heavy toward COG as they are now. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.54 ranks just 3 percentage points from a 52-week peak. Cabot Oil & Gas Corporation could get a near-term boost, as the hedges related to these bets unwind over the next several weeks.

Over the past 10 second quarters, VRTX has been positive nine times, averaging a jaw-dropping gain of 17.7%. The stock could certainly use a lift. Although VRTX has started to show signs of life of late -- up 3.8% at $81.39 -- it remains 35% lower year-to-date.

Options traders could be caught off guard, should history repeat itself. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Vertex Pharmaceuticals Incorporated's 50-day put/call volume ratio is docked at an annual high of 4.42. In other words, puts have been bought to open over calls at the fastest clip of the year.

A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners