4 High-Flying Stocks with Upside Potential

10/10/2012 9:00 am EST

Focus: STOCKS

Quantitative analyst Chris Prybal of Schaeffer’s Investment Research eyes four stocks with contrarian potential.

Here's an updated list of equities that notched an all-time high Monday against a sturdy backdrop of skepticism. Based on sentiment backdrops, the environment is ripe for continued upside in AutoNation, Inc. (AN), Colgate-Palmolive Company (CL), Wal-Mart Stores, Inc. (WMT), and Williams-Sonoma, Inc. (WSM).

For starters, lofty levels of short interest on outperforming stocks allow the possibility for a short-covering rally. Meanwhile, such high levels of pessimism from the brokerage bunch leaves the door wide open for a round of upgrades and/or price-target hikes. Additionally, heavy accumulations of near-term put open interest could give these equities a lift, as the bearish bets unwind.

Auto retailer AutoNation, Inc. (NYSE:AN)

  • The stock is up 30% year-to-date.

  • Nearly 20% of its float is sold short.

  • 92% of all analysts following AN maintain a "hold" or "sell" recommendation.

  • Over the past 50 trading days, more than three times as many puts were bought to open as calls.

chart
Click to Enlarge

Consumer products maker Colgate-Palmolive Company (NYSE:CL)

  • The equity is up 17.5% year-to-date.

  • Short Interest is up 23% over the past month.

  • 68% of analysts covering CL rate it a "hold" or "sell."

  • The equity is trading on par with its 12-month price target.

  • There are more puts than calls among options expiring in the next three months, with a bias towards puts over past 10 days.

chart
Click to Enlarge

NEXT PAGE: A Mega Retailer and Gourmet Purveyor.

|pagebreak|

Mega retailer Wal-Mart Stores, Inc. (NYSE:WMT)

  • WMT is up 37% year-over-year.

  • 55% of analysts following WMT deem it a "hold."

  • WMT is trading just shy of its 52-week price target.

  • There are nearly 20,000 more puts than calls among options with a three-month shelf life.

  • Over the past five trading days, over 8,000 puts have been added at the October 75 strike.

chart
Click to Enlarge

Specialty retailer Williams-Sonoma, Inc. (NYSE:WSM)

  • WSM is up 39% year-over-year.

  • Short Interest represents 5.5% of the available shares for trading (float).

  • 73% of analysts who follow WSM rate the stock a "hold" or "sell."

  • WSM is trading above its 52-week target price.

  • Over the past 10 trading days, in excess of 18 puts have been bought to open versus every one call.

chart
Click to Enlarge

By Chris Prybal of Schaeffer’s Investment Research.

Related Articles on STOCKS