2 Reasons to Like Raytheon Right Here

It's a good time to buy calls on the Boeing rival

Oct 31, 2019 at 1:24 PM
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Raytheon Company (NYSE:RTN) shares came barreling into 2019, surging more than 30% from their late-December lows near $144 to their late-February highs around $188. The defense stock spent the next several months churning in a tight range just below its first-quarter peak, before taking a sharp bounce off its 50-week moving average in late August.

This next leg north brought the Boeing rival to a two-year high of $216.54 this past Monday, Oct. 28. The shares were last seen just below here at $214.12, but history suggests even higher highs could be in store. Specifically, data from Schaeffer's Senior Quantitative Analyst Rocky White shows RTN has been one of the best stocks to own on the S&P 500 Index (SPX) in November. Looking back 10 years, the equity has averaged a monthly gain of 5%, and boasts a 100% win rate.

Couple this with another historically bullish signal that's flashing, and Raytheon stock could be in for a big November. Specifically, the equity's Schaeffer's Volatility Index (SVI) of 22% ranks in the 13th percentile of its 12-month range.

Not only does this show that short-term options are relatively cheap at the moment, from a volatility perspective, but there have been 10 other times since 2008 where RTN was trading near 52-week highs while its SVI was perched in the 20th annual percentile or lower. Per data from White, following these previous signals, Raytheon stock was up 3%, on average, one month out, with 90% of those returns positive.

There's room for analysts to raise their ratings on a stock that's up almost 40% year-to-date. While four of the 12 brokerages covering RTN stock still maintain a lukewarm "hold" rating on the equity, the average 12-month price target of $228.07 is a slim 6.5% premium to current levels. A round of bull notes could strengthen tailwinds for Raytheon.

rtn stock weekly price chart on oct 31


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