Buy the Dip on These Apple Suppliers

QRVO and SWKS have roughly doubled, on average, in the second year of a president's term

by Andrea Kramer

Published on Jan 10, 2018 at 1:50 PM
Updated on Jan 10, 2018 at 2:50 PM

Analysts at Longbow today opined that while Apple Inc. (NASDAQ:AAPL) suppliers Qorvo Inc (NASDAQ:QRVO) and Skyworks Solutions Inc (NASDAQ:SWKS) were strong in 2017, weak trends out of China (subscription required) will linger in the first quarter. However, while Apple is facing scrutiny about a number of issues -- its slowing of older iPhones, youth phone addiction, and iPhone X demand, to name a few -- SWKS and QRVO stocks could bounce back in a big way this year, if recent history is any indicator. Below, we take a look at the 25 best stocks to own during the second year of a presidential cycle.

Best Stocks to Buy for Trump's Second Year

It's been almost one year since President Trump was sworn in, and U.S. stocks have been on a tear. However, as Schaeffer's Senior Quantitative Analyst Rocky White recently discussed, the second year of a presidential cycle tends to be the most volatile, and the first half of that year is especially brutal, historically. Nevertheless, the following stocks have outperformed during previous Year 2s in the Oval Office (2006, 2010, and 2014, specifically), with QRVO and SWKS near the top of the pack.

best stocks 2nd year pres cycle

QRVO Has More Than Doubled, On Average, In Year 2

Qorvo stock generated the second-best return of all S&P 500 Index (SPX) stocks during the second year of the last three presidential cycles, more than doubling, on average, and ending higher all three years.

Since notching a two-year high of $81.20 in mid-November, the shares of QRVO have given up roughly 17%, and were last seen 1.8% lower at $67.76. The stock is now staring up at its formerly supportive 200-day moving average -- which contained several pullbacks in the second half of 2017 -- but seems to have found an ally in its 320-day trendline. Should the Apple supplier surge during Trump's second year in office, as it has in previous administrations, QRVO stock's recent dip would look like an opportune time to buy the shares at a discount.

The equity's recent struggles have fueled a surge in short interest, which jumped 33.5% just in the most recent reporting period. Meanwhile, just five of 17 analysts offer up "buy" or better endorsements for Qorvo stock, and near-term options traders are more put-heavy than usual right now, as evidenced by the Schaeffer's put/call open interest ratio (SOIR) of 1.18 -- in the 80th percentile of its annual range. In other words, should QRVO once again rally in the next year, there's plenty of pessimism that could unwind and drive the equity back to higher highs.

Analysts, Options Buyers Remain Confident in SWKS

Skyworks Solutions stock isn't far behind QRVO on the list, rallying roughly 98.5%, on average, during the second year of the past three presidential cycles. Further, the security has ended the year higher 100% of the time, with a median return of more than 101%.

SWKS stock touched a record high of $117.65 in early November, but plummeted into December as concerns about iPhone X sales rattled Apple suppliers. The equity's pullback was contained in the $95 region, however -- home to SWKS' 320-day moving average, and an area that contained the stock's drop in mid-2017. At last check, the equity was trading at $98.58, down 2.1% on the day.

Unlike Qorvo, though, Wall Street has remained confident in Skyworks Solutions. The shares still boast 17 "buy" or better ratings, out of 20 analyst opinions, and options traders have been upping the bullish ante in recent weeks. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than two SWKS calls for every put in the past two weeks. Further, the 10-day call/put volume ratio of 2.02 is in the 92nd percentile of its annual range, underscoring a healthier-than-usual appetite for bullish bets over bearish.

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