4 High-Flying Stocks with Upside Potential

10/10/2012 9:00 am EST


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.

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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.

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NEXT PAGE: A Mega Retailer and Gourmet Purveyor.


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.

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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.

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By Chris Prybal of Schaeffer’s Investment Research.

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