Time to Go Long on This Home Furnishings Stock

RH stock has historically outperformed in November

Nov 6, 2018 at 11:52 AM
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It's shaping up to be a great time to go long on home furnishings retailer Restoration Hardware Holdings, Inc (NYSE:RH). While the shares have pulled back in recent months from their highs near $160 from early September, they're bouncing from the site of their 2015 and 2017 highs, hinting at double-barreled support going forward. Not only that, but the shares have historically outperformed in November, gaining about 10% on average for the month. Add this to the fact that the company recently bought back $700 million worth of shares and sentiment is overly bearish, RH has all the makings of a strong contrarian trade.

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Hammering down on the sentiment scene, short interest accounts for a monstrous 35.9% of the float. Going by average daily volumes, it would take these bears more than six sessions to cover, showing there's plenty of potential for a short squeeze.

Meanwhile, the majority of analysts still have "hold" or "sell" ratings on the retailer. This marks yet another potential upside catalyst, since a rally could pressure these bears to upgrade their outlooks on RH.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this RH 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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