Put Buyers Should Watch Worst March Stocks Newmont Mining and Cardinal Health

Newmont Mining and Cardinal Health have underperformed significantly in March over the past 10 years

Feb 28, 2017 at 2:11 PM
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Earlier we looked at the best stocks to buy in March, based on historical returns. Now, we'll turn to our list of the worst-performing stocks for the month ahead, with data provided by Schaeffer's Senior Quantitative Analyst Rocky White. Two names that have struggled the most in March are Newmont Mining Corp (NYSE:NEM) and Cardinal Health Inc (NYSE:CAH). Let's take a closer look at NEM and CAH to see if the shares can overcome these seasonal headwinds. 

worst march stocks

As you can see on the chart above, mining stock NEM has only finished March in positive territory half the time over the past 10 years, losing, on average, 3.2%. While the shares are higher on a year-over-year basis, they're now well below their August highs near $46 -- last seen at $34.81 -- with the 200-day moving average acting frequently as resistance since mid-November. 

This technical setup doesn't inspire confidence, yet there's plenty of optimism being levied toward NEM. First of all, call buying has nearly doubled put buying during the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), with the resulting call/put volume ratio of 1.90 ranking above 81% of comparable readings from the past year. This shows options traders have been more bullish than normal.

On top of this, 60% of analysts actually recommend buying Newmont Mining Corp, with zero "sell" ratings on the books. If the shares continue to struggle on the charts, losses could be exacerbated by bulls throwing in the towel -- making NEM shares a lucrative target for put buyers once again. 

As for CAH, the shares have actually been running hot in recent weeks -- so hot, in fact, that the stock has hit overbought territory, based on last night's 14-day Relative Strength Index (RSI) of 75. Plus, at $81.37, the stock is running into its year-over-year breakeven level, just as historical headwinds are set to kick in. Specifically, CAH has finished lower five out of the past 10 Marches, with an average return of negative 1.1%. 

While volume has been light on an absolute basis, there's been a clear preference for CAH calls over puts. For instance, the shares have a 10-day put/call volume ratio of 2.03 at the ISE, CBOE, and PHLX, which ranks in the 82nd annual percentile. Moreover, the stock boasts a Schaeffer's put/call open interest ratio (SOIR) of 0.44. Not only does this reading show call open interest more than doubles put open interest in the front three-months' series of options, but it's seated just 1 percentage point from an annual low. 

And whether you want to bet against Cardinal Health Inc, or even want to go against its historical record and target calls, right now is a great time to buy near-term options. This is based on the stock's Schaeffer's Volatility Index (SVI) of 18%, which ranks in the low 5th annual percentile. In other words, the options market is pricing in unusually low volatility expectations at the moment. 

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