Why Trump's First Year Could Fuel Micron Technology, Inc.'s (MU) Fire

The first year of presidential cycles has been a consistent boon to Micron Technology, Inc. (MU) stock

Jan 4, 2017 at 10:32 AM
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With the 2017 Consumer Electronics Show (CES) kicking off in Las Vegas tomorrow, Micron Technology, Inc. (NASDAQ:MU) should be in focus. According to one Goldman Sachs analyst, the semiconductor stock tends to be extremely volatile during these annual conferences, averaging a 7% swing in either direction over the last five years.

But there are other reasons to be paying attention to Micron shares. Specifically, MU has been one of the best stocks on the S&P 500 Index (SPX) during the first year of past three presidential cycles (2005, 2009, and 2013). The full list, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White, is below:

best spx stocks first presidential year jan 4

According to the chart, MU has been positive every time in the first year of the past three presidential cycles -- even though first years tend toward stock market weakness. Even more impressive, Micron has averaged an annual gain of nearly 184%. In other words, with President-elect Donald Trump about to take office, history is on the stock's side.

Then again, the shares are no stranger in big upward moves. Last year, the stock soared roughly 55%, and hit an annual high of $23.64 as recently as Dec. 27. At last check, MU was just below this peak, at $22.63.

Not surprisingly, bullish expectations are sky-high across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past 10 sessions, traders have bought to open nearly six calls for every put, and the corresponding call/put volume ratio of 5.99 ranks in the lofty 84th percentile of its annual range.

It's an attractive time to pounce on short-term MU options, too. The stock's Schaeffer's Volatility Index (SVI) of 39% rests below 92% of all readings from the last year. In other words, near-term volatility expectations are muted from a historical standpoint. At the same time, Micron's Schaeffer's Volatility Scorecard (SVS) of 70 indicates the shares have tended to make larger moves than the options market has priced in over the past 12 months.

Optimism prevails elsewhere on Wall Street, too. Most notably, 15 of 19 analysts rate Micron Technology, Inc. (NASDAQ:MU) a "buy" or better. Plus, the stock's consensus 12-month price target of $26.58 resides in territory not charted since mid-2015.

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