Buzz Stocks: Allergan, DreamWorks, Baker Hughes

Today's stocks to watch in the news include AGN, DWA, and BHI

Andrea Kramer
Nov 17, 2014 at 9:29 AM
facebook twitter linkedin


U.S. stocks are pointed lower this morning, due to a surprise drop in Japan's gross domestic product (GDP). Among the equities in focus are drugmaker Allergan, Inc. (NYSE:AGN), entertainment issue DreamWorks Animation SKG, Inc. (NASDAQ:DWA), and oil-and-gas concern Baker Hughes Incorporated (NYSE:BHI), which are headlining Merger Monday.

  • AGN is headed 5% higher, on reports that the firm is on the cusp of being acquired by Actavis plc (NYSE:ACT) for about $62.5 billion, or $210 per share -- trumping Valeant Pharmaceuticals Intl Inc's (NYSE:VRX) bid of $200 per share. AGN ended last week at $198.65, and has spent most of November dawdling just below the VRX bid price. In light of today's expected uptick, Allergan, Inc. will be sitting in record-high territory, much to the delight of recent option buyers. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 3.62 stands higher than 91% of all other readings from the past year, pointing to a healthier-than-usual appetite for long calls over puts during the past two weeks.

  • DWA is poised to drop 14% out of the gate, amid reports that toymaker Hasbro, Inc. (NASDAQ:HAS) has backed out of talks to buy the studio. Sources say HAS turned tail after failed price negotiations and a negative shareholder reaction to the news -- which hit the Street last Thursday, and translated into a two-day drop of 6% for HAS. The shares of DreamWorks Animation SKG, Inc., meanwhile, soared 16.3% in the same span, settling at $26.02 on Friday. This morning's anticipated drop could catch some DWA options traders off-guard. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.46 stands just 8 percentage points from a 12-month low, suggesting short-term speculators are more call-biased than usual. Relatively speaking, buyers are paying up for their near-term contracts, too, as the security's Schaeffer's Volatility Index (SVI) of 60% ranks in the 74th percentile of its annual range.

  • Finally, BHI is on pace for an 11% jump, after the firm said it reached a definitive agreement to be bought by Halliburton Company (NYSE:HAL) for close to $35 billion, or $78.62 per share -- a premium of 31.3% to BHI's closing price of $59.89 on Friday. The deal -- which has been approved unanimously by both companies' boards -- confirms chatter from late last week, before which Baker Hughes Incorporated was lingering just north of $50. Short-term options traders are likely cheering the news, as the equity's SOIR of 0.61 sits higher than just 19% of all other readings from the past year.

A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 

Partnercenter