The Best Stocks to Own in February

CF Industries Holdings, Inc. (CF) and Mosaic Co (MOS) tend to outperform in the month of February

Jan 31, 2017 at 9:41 AM
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Historically speaking, February is one of the worst months for stocks. In fact, Februaries during the first year of a presidential cycle, like this year, tend to be particularly brutal. That doesn't mean every individual stock is set to slide, of course. Among the names that have historically outperformed during the months of February are fertilizer specialists CF Industries Holdings, Inc. (NYSE:CF) and Mosaic Co (NYSE:MOS). The table below shows the best February performers over the past 10 years, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

best stocks february

CF has been off to a strong start in 2017, tacking on more than 12% already this year, at $35.39. That's no change of pace, either, as the stock has surged 70% off its August lows, with the 20- and 30-day moving averages helping the shares higher recently. Plus, CF finished last Friday above its 80-week moving average -- a trendline that has served alternately as support and resistance many times since 2009 -- for the first time since September 2015. What's more, the stock has outperformed the broad S&P 500 Index (SPX) by about 35 percentage points over the past three months.

There could be more gains ahead, too, as CF has finished the month of February positive in nine of the last 10 years, averaging a 12% monthly gain. The company is due to report quarterly earnings in the middle of the month -- and though CF doesn't have the strongest history in terms of post-earnings moves, the stock tacked on 8.4% in the session following its earnings report last February.

Despite the stock's technical strength, CF hasn't been a favorite among analysts and traders. Of 14 brokerage firms tracking the stock, 10 call it a "hold" or "strong sell." Call buying has been popular on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where CF's 10-day call/put volume ratio of 3.02 sits in the 73rd annual percentile. However, short interest also represents nearly 14% of CF Industries Holdings, Inc.'s (NYSE:CF) total float, suggesting some short sellers may be picking up calls as hedges against a surprise upside move.

MOS has also been positive in nine of the past 10 Februaries, averaging a gain of 11.4%. The stock has been popping higher since October, and is up almost 30% year-over-year, at $30.97. The shares are currently perched above support at the rising 40-day moving average, as well as the $30-$31 region, which is home to MOS' March and August 2016 peaks.

Next week's earnings report -- due before the open on Tuesday, Feb. 7 -- could be a boon for MOS. After all, the stock has moved to the upside in the sessions subsequent to reporting in six of the past eight quarters. But traders don't seem to be betting on a repeat. While short interest is elevated, options traders have been targeting long puts over calls at an unusual rate. At the ISE, CBOE, and PHLX, the stock's 10-day put/call volume ratio of 0.88 ranks above 72% of all other readings from the past year. The brokerage bunch seems to concur -- 12 out of 14 analysts currently rate Mosaic Co (NYSE:MOS) a "hold" or worse.

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