This Stock and ETF Could Shine in September

GRUB could extend its quest for record highs

Aug 30, 2018 at 11:22 AM
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The stock market tends to struggle in the month of September. However, certain sectors could be immune, if recent history is any indicator. Among the best exchange-traded funds (ETFs) to own in September is the Invesco Dynamic Leisure and Entertainment ETF (PEJ) -- which features airline stocks, casino stocks, and GrubHub Inc (NYSE:GRUB) among its top holdings. What's more, GRUB is eyeing its longest win streak in years, and now could be time to buy calls on the red-hot stock.

Specifically, below are the 20 best ETFs to own in September, looking back 10 years. The list is sorted by percent positive, with PEJ the lone fund to boast a 70% monthly win rate. On average, PEJ has advanced 1.42% in the month of September -- the second-highest on the list.

20 best ETFs for September

Time to Grab GrubHub Shares

Food delivery concern GRUB is among the top 10 PEJ holdings, representing 3.93% of the fund. The shares have been on a tear lately, doubling in 2018 and touching a record high of $145.07 out of the gate today. What's more, GrubHub stock is on pace for a ninth straight win, which would mark its longest win streak since October 2016. At last check, the shares are up 0.7% to trade at $143.99.

GRUB stock chart aug 30

Meanwhile, short-term options are attractively priced right now. GRUB's Schaeffer's Volatility Index (SVI) of 33% is in just the 7th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations.

There have been eight other times GRUB stock was trading near new highs when its SVI was simultaneously perched in the lower fifth of its 12-month range. After these signals, the shares were higher one month later 75% of the time, and up an average of 7.84%, per Schaeffer's Senior Quantitative Analyst Rocky White. In other words, now might be a good time to purchase near-term GrubHub call options, if past is prologue.

Despite the equity's outperformance on the charts, more than half of analysts still maintain a "hold" or "strong sell" rating on the stock. A round of well-deserved upgrades could lure more buyers to the GRUB camp.

Likewise, a healthy 8.6% of its float is sold short -- representing more than a week's worth of pent-up buying demand, at the stock's average daily volume. Short interest declined nearly 13% in the past two reporting periods, and an extended short squeeze could add fuel to to GRUB's fire.

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