Signet Jewelers, Bed Bath & Beyond Lead List of Best March Stocks

Shares of Signet Jewelers Ltd. (NYSE:SIG) and Bed Bath & Beyond Inc. (NASDAQ:BBBY) have finished higher in March for 10 years straight

Feb 28, 2017 at 10:53 AM
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It's no secret that shares of traditional retailers have struggled mightily as Amazon.com, Inc.'s (NASDAQ:AMZN) dominance continues to grow. Signet Jewelers Ltd. (NYSE:SIG) and Bed Bath & Beyond Inc. (NASDAQ:BBBY) are just two examples of retail stocks that have struggled over the long term. However, data suggests that SIG and BBBY could be due for a bounce, as both landed on our list of the best stocks to own in March, compiled by Schaeffer's Senior Quantitative Analyst Rocky White: 

best march stocks

As you can see, SIG has been strong during March, closing the month in positive territory each of the past 10 years, with an average return of 15.4%. Shareholders would love to see such a move after the stock's performance over the past 12 months, dropping more than 41% to trade at $65.84 -- including a 9.7% decline today, as the company deals with sexual harassment allegations. In fact, SIG earlier touched a three-year low of $65.55. 

Today's sharp drop is particularly inconvenient for options traders, who, despite the stock's technical weakness, have been unusually focused on long calls in recent weeks. This is illustrated by SIG's 10-day call/put volume ratio of 1.62 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which outranks two-thirds of readings from the past year. That said, with 15% of the stock's float sold short, it's possible call buyers could be short sellers hedging against upside risk.

Interestingly, analysts are still very bullish on Signet Jewelers Ltd. In fact, not a single brokerage firm out of 13 recommends selling the stock, while nine say to buy it. Shareholders better hope for another strong performance in March, or the shares could fall victim to an unwinding of bullish sentiment across Wall Street, including downgrades. 

BBBY has also finished the last 10 Marches in positive territory, with an average gain of 5.8%. While the stock has underperformed in the long run amid broader weakness in the retail sector, it's currently clinging to support atop the year-to-date breakeven level, which roughly corresponds with the round $40 mark -- representing half its all-time highs. Specifically, the shares were last seen trading at $40.67, down about 3%.

If the aforementioned foothold stays in place, and BBBY stages another March rally, it could benefit from an unwinding of bearish options traders. To be more specific, the stock sports a Schaeffer's put/call open interest ratio (SOIR) of 2.09. which is just 7 percentage points from a 12-month peak. From a contrarian perspective, it also helps that analysts are already bearish on Bed Bath & Beyond Inc. Of the 16 brokerage firms with coverage on the stock, 100% recommend holding or selling the shares.

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