Contrarian Bulls Should Consider This Mega-Cap Trio

Why large-caps Facebook Inc (NASDAQ:FB), General Electric Company (NYSE:GE), and Wells Fargo & Co (NYSE:WFC) could rally

Jun 23, 2015 at 2:06 PM
facebook twitter linkedin

Move over, Wal-Mart Stores, Inc. (NYSE:WMT). Facebook Inc (NASDAQ:FB) has just knocked the retailer out of the S&P 500 Index's (SPX) 10 biggest companies by market cap. Getting onto the list is quite a feat for the social network, and it's been helped by an impressive performance on the charts. That said, here's a closer look at FB and a couple other mega-caps on the list -- General Electric Company (NYSE:GE) and Wells Fargo & Co (NYSE:WFC) -- that could be poised to extend their gains.

  • As alluded to, FB has been on a tear, adding 11.5% year-to-date to trade at $86.98. Earlier, the shares hit a record high of $87.49, after news broke of a renewed partnership with Mondelez International Inc (NASDAQ:MDLZ) and a bullish note from Deutsche Bank. Specifically, the brokerage firm said FB's WhatsApp and Messenger apps could generate up to $10 billion in incremental revenue by 2020. That hasn't stopped options traders from betting against the stock, though. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Facebook Inc has racked up a put/call volume ratio of 0.47 -- higher than two-thirds of comparable readings from the last year. A capitulation among these naysayers could spell more upside for the outperformer.

  • Meanwhile, GE has tacked on a solid 8.9% year-to-date to trade at $27.52. Even more impressive, since bottoming at an annual low of $23.41 in mid-January, the stock has shot up 17.6%. Analysts have been slow to recognize General Electric Company's upward trajectory, though, as nearly half still rate the shares a middling "hold." In other words, GE could benefit from a round of upgrades.

  • Finally, WFC is fresh off an all-time peak of $58.26 -- though it was last seen 0.2% lower at $57.82. Longer term, the stock has been impressive, adding close to 15% since bouncing from a mid-January bottom of $50.42 -- ushered higher by its 10- and 20-day moving averages. A capitulation among skeptical analysts could result in tailwinds for Wells Fargo & Co, as half of the firms tracking it have handed out "hold" or worse ratings. Similarly, WFC's average 12-month price target of $57.84 is in line with its current perch, suggesting future bullish notes are a distinct possibility.


Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

Best stocks for October and worst stocks for October


Special Offers from Schaeffer's Trading Partners