Buzz Stocks: Microsoft, Family Dollar, Valeant Pharma

Today's stocks to watch in the news include MSFT, FDO, and VRX

Oct 20, 2014 at 9:39 AM
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U.S. stocks are lower out of the gate, with disappointing earnings from IBM Corp. (NYSE:IBM) dragging down the Dow. Among the equities in focus, today's stocks to watch are software titan Microsoft Corporation (NASDAQ:MSFT), discount retailer Family Dollar Stores, Inc. (NYSE:FDO), and drugmaker Valeant Pharmaceuticals Intl Inc (NYSE:VRX).

  • MSFT is down 1.4% at $43.05, but remains nearly 15% higher year-to-date. Ahead of the company's quarterly earnings report, slated for release after the close on Thursday, traders are digesting reports of a smart watch in the works. Specifically, the firm is allegedly planning to debut the wearable device within the next few weeks. Despite outperforming the broader S&P 500 Index (SPX) during the past three months, Microsoft Corporation's bullish bandwagon is far from crowded. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.01 stands just 4 percentage points shy of a 52-week peak, implying that short-term options players have rarely been more put-biased during the past year. Meanwhile, more than half of the analysts following MSFT maintain tepid "hold" opinions. Should Microsoft impress with its earnings report or smart watch debut, an unwinding of pessimism in the options pits or among analysts could help the shares continue their longer-term run higher.

  • Last night, FDO traders learned that activist Elliot Management Corp. nominated seven candidates to the Family Dollar Stores, Inc. board, citing a missed opportunity to "facilitate a bidding war" between Dollar General Corp. (NYSE:DG) and Dollar Tree, Inc. (NASDAQ:DLTR), the former of which had a "clearly superior" bid rejected. Speaking of, FDO on Oct. 30 will host a special meeting of shareholders to approve the DLTR transaction. On the charts, the recent M&A back-and-forth has translated into a year-to-date gain of 19% for FDO, which was last seen 0.7% higher at $77.35.

  • Finally, VRX is 1.1% higher at $121.71 in early trading. Bolstering the stock is a stronger-than-expected earnings report and forward guidance, and Valeant Pharmaceuticals Intl Inc CEO's confession that the company is just waiting on the "appropriate time" to up its bid for Allergan, Inc. (NYSE:AGN). While the brokerage bunch is already bullish toward VRX -- the stock boasts nine "buy" or better ratings, compared to two "holds" -- options traders could be caught off-guard by today's upside move. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 2.80 stands higher than 92% of all other readings from the past year, pointing to a healthier-than-usual appetite for long puts over calls during the past two weeks.
 

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