The Outperforming Retail Stock With Room to Run

VFC is trading near its year-to-date high, following an impressive earnings report

Aug 1, 2017 at 10:57 AM
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Apparel stock VF Corp (NYSE:VFC) has come to life in 2017. The shares are up almost 16% year-to-date, touching a year-to-date high on July 28 following a strong post-earnings rally. However, this outperforming stock is seemingly still being overlooked by investors, meaning VFC has even more upside potential, from a contrarian standpoint.

VFC stock july 28

For example, the vast majority of analysts are bearish on the shares. Specifically, twice as many brokerages have "hold" or worse ratings on the stock than those that recommend buying it. Given its clear strength on and off the charts, it would not be a slight bit surprising to see upgrades come through and help extend VF Corp stock’s impressive rally.

Not to mention, short sellers have continued to target the stock, with short interest rising significantly over the past year. These bears -- who are likely staring at sharp losses -- now control 14 days’ worth of pent-up buying power, going by average daily volumes. If they begin to throw in the towel, it would only help VFC on the charts.

It’s also a good time to target short-term VFC options. This is according to its Schaeffer’s Volatility Index (SVI) of 20%, which ranks just 7 percentage points from a 12-month low. In other words, volatility expectations are relatively muted at the moment on near-term strikes. Plus, our recommended call option has a leverage ratio of 8.0, meaning it’ll double in value on just an 11.6% increase in the underlying shares.

Subscribers to Schaeffer's Weekend Trader Series options recommendation service received this VFC commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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