A Housing Stock to Target During the Government Shutdown

PulteGroup tends to historically outperform after a government shutdown

Managing Editor
Jan 9, 2019 at 11:55 AM
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PulteGroup, Inc. (NYSE:PHM) has enjoyed a 39% rally since its late-October bottom near $20.50. What's more, the housing stock could keep climbing, if past is precedent, after flashing a big bullish signal.

Schaeffer's Senior Quantitative Analyst Rocky White recently looked at the best stocks to own during a government shutdown. Looking at shutdowns since 1982, PulteGroup stock has been positive a month after 83% of the time, and boasts an average gain of 14.1%, the best average return by far of the stocks we tracked.

At last check, PulteGroup stock was down 0.2% to trade at $28.19. Another 14.1% burst from current levels would put the equity back above $32 for the first time since a mid-June bear gap. PHM boasts a 9% gain so far in 2019, and earlier this week toppled its formerly resistant 160-day moving average.

Daily Stock Chart PHM

Several other factors could keep the wind at the housing stock's back. Most analysts are still bearish on PHM, with 10 of 14 in coverage rating it a "hold" or worse. In addition, the security's consensus 12-month price target of $26.87 sits below the stock's current perch.

And despite limited absolute volume, a capitulation from some of the weaker bearish hands could also create tailwinds for the shares. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), PHM's 10-day put/call volume ratio of 3.74 ranks in the 94th annual percentile. This means puts nearly quadruple calls, and have been bought to open over calls at a quicker-than-usual clip in the past two weeks.

Lastly, a short squeeze is definitely in play. Short interest fell by 2% in the last two reporting periods to 26.44 million shares. This still represents a hefty 10.3% of PHM's total available float though, and 4.5 times the average trading volume.

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