2 Semiconductor Stocks That Could Rally Into Election Day

Semiconductor concerns Micron Technology, Inc. (NASDAQ:MU) and NVIDIA Corporation (NASDAQ:NVDA) are among the 25 best stocks to own the week before a presidential election

Nov 2, 2016 at 3:17 PM
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Earlier this week, we outlined the 25 worst stocks to own the week ahead of a presidential election, with one sector standing out as particularly vulnerable. Today, we're looking at the 25 best stocks to own during the week of the election -- if history is any indicator -- with two names standing out: semiconductor concerns Micron Technology, Inc. (NASDAQ:MU) and NVIDIA Corporation (NASDAQ:NVDA).

Below are the 25 best historical performers in the week leading up to a presidential election, going back to 2000 (four elections, based on calendar days), courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Since the entire list has been positive 100% of the time, they're sorted by average return.


MU boasts an average one-week pre-election return of 12.23% -- the fourth-best on the list. At last check, the stock is down 1.9% at $16.66, possibly in response to news that a vice president filed to sell $1.1 million in shares last week. Still, the stock is up nearly 18% year-to-date, and since touching an annual high of $18.33 -- roughly double its May lows -- after earnings in early October, seems to have found a floor in the $16.50 neighborhood.

Traders looking to gamble on MU's short-term trajectory can buy options at a relative bargain right now. The stock's Schaeffer's Volatility Index (SVI) of 43% is higher than just 14% of all other readings from the past year, pointing to relatively muted volatility expectations priced into near-term options. Likewise, the equity's Schaeffer's Volatility Scorecard (SVS) of 67 indicates that Micron Technology, Inc. (NASDAQ:MU) shares have tended to exceed option traders' volatility expectations over the past year.

NVDA, meanwhile, has averaged a one-week gain of 9.64% heading into the past four presidential elections. While the stock has more than doubled year-to-date, and just touched an all-time best of $72.95 on Oct. 26, short interest still accounts for 11.9% of the equity's total available float. At NVDA's average pace of trading, it would take nearly eight days to buy back these bearish bets -- plenty of fuel for a short-covering rally.

Plus, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.41 is higher than 91% of all other readings from the past 12 months, suggesting near-term option players have rarely been more put-heavy. An exodus of option bears could also translate into more upside for NVDA, which sports a lofty SVS of 91 -- an attractive indicator for would-be option buyers.

At last check, NVDA shares were trading around breakeven at $69.05. Citi Research today initiated coverage of the stock with a "buy" rating, saying, "We believe Street is underestimating sales/earnings growth in next three years as Nvidia continues to transform itself from a PC to a diversified gaming, data center and auto graphics company," and touted the company's exposure to self-driving cars and virtual reality, among other things. Still, nine out of 23 analysts maintain "hold" or worse opinions on outperforming NVIDIA Corporation (NASDAQ:NVDA), leaving the door wide open for potential upgrades to drive record highs.

Taking an even broader look at the sector, of the 38 stocks that fall into our internal "Semiconductor" category, 63% are trading above their 80-day moving average -- among the highest of any group that we track. Further, the average short interest ratio is 4.45, indicating about a week's worth of pent-up buying demand, should bears abandon ship. And still, just 58% of analysts covering the sector offer up "buy" or better endorsements -- barely higher than a year ago, despite outperformance -- indicating plenty of room on the bullish bandwagon.

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