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Opportunities Ahead of Stock Earnings, According to Options Market Moves and our AI Quant Stock Models

Jan 24, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • In a note to clients this morning, Goldman Sachs warned that activity in the options market indicates bearish fears ahead of earnings in basic materials, technology, and energy stocks while highlighting bullish optimism ahead of earnings in financial and consumer stocks. The note, written by Goldman Sachs derivatives strategists Katherine Fogertey and John Marshall, also says that options investors are, “pricing in a high degree of concern for the average single stock,” while they are, “broadly constructive,” on S&P 500 performance.  
     
  • Goldman Sachs highlighted 10 stocks that options investors are most worried about prior to earnings, which can be seen in the table below.

Stocks The Options Market Is Most Worried About

Company Name Company Ticker Regional Model Ranking Sector Model Ranking Estimated CY4Q2018 Earnings Date
Harley-Davidson, Inc. HOG  US Large Cap - Unattractive  US Consumer Discretionary - Attractive 1/29/2019
Cree, Inc. CREE  US Large Cap - Top Short  US Information Technology - Unattractive 1/30/2019
Symantec Corporation SYMC  US Large Cap - Neutral  US Information Technology - Neutral 1/31/2019
Qorvo, Inc. QRVO  US Large Cap - Neutral  US Information Technology - Neutral 2/7/2019
Huntsman Corporation HUN  US Large Cap - Attractive  -  2/12/2019
Continental Resources, Inc. CLR  US Large Cap - Neutral  -  2/13/2019
DISH Network Corporation DISH  US Large Cap - Neutral  US Consumer Discretionary - Neutral 2/15/2019
Whiting Petroleum Corporation WLL  US Large Cap - Top Short  -  2/21/2019
Palo Alto Networks, Inc. PANW  US Large Cap - Unattractive  US Information Technology - Neutral 2/25/2019
Mallinckrodt Public Limited Company MNK  -   -  2/26/2019

Source: Goldman Sachs & Capital IQ

 

  • Based on sentiment in the options market and our stock model rankings, we believe that Cree, Inc. (CREE) and Whiting Petroleum Corporation (WLL) may provide attractive short opportunities.
     
  • Cree, Inc. maintains ‘Top Short’ ratings in our Low Volatility & Momentum factor and Growth factor while the company’s Quality Value factor and Technicals factor are both rated as ‘Unattractive’. A disappointing earnings announcement paired a poor rating our Low Volatility & Momentum factor may send Cree’s stock price spiraling.  
     
  • Whiting Petroleum Corporation (WLL) maintains a ‘Top Short’ rating in our Low Volatility & Momentum factor, ‘Unattractive’ ratings in our Growth factor and Technicals factor, and a ‘Neutral’ rating in our Quality Value Factor. As discussed above, a disappointing earnings announcement for Whiting Petroleum paired with the stock’s poor Low Volatility & Momentum factor rating could send share prices plummeting. In addition to this, Whiting Petroleum was highlighted as a January 2019 Top Short QuantShot, which you can see here.
     
  • Goldman Sachs also highlighted 5 stocks that options investors are most optimistic about prior to earnings, which can be seen in the table below.

Stocks The Options Market Is Highly Optimistic About

Company Name Company Ticker Aggregate Model Ranking Sector Model Ranking Estimated CY4Q2018 Earnings Date
Synchrony Financial SYF  US Large Cap - Unattractive  -  1/23/2019
Colgate-Palmolive Company CL  US Large Cap - Top Buy  US Consumer Staples - Top Buy 1/25/2019
Franklin Resources, Inc. BEN  US Large Cap - Neutral  -  1/30/2019
The Manitowoc Company, Inc. MTW  US SMID Cap - Neutral  US Industrials - Neutral 2/1/2019
Whiting Petroleum Corporation WLL  US Large Cap - Top Short  -  2/21/2019

Source: Goldman Sachs & Capital IQ

 

  • Based on sentiment in the options market and our stock model rankings, we believe that Colgate Palmolive Company (CL) may provide an attractive long investment opportunity.
     
  • Colgate Palmolive is not only attractive relative to large-cap US stocks, as indicated by its “Top Buy” rating in our US Large-Cap Global Top Stock Ideas, but it is also attractive relative to other US consumer staples stocks, as indicated by its “Top Buy” rating in our US Consumer Staples Global Top Stock Ideas. Because Colgate Palmolive is a consumer staples company, demand for its goods should see little fluctuation, potentially making it a stable investment even if volatility returns to stock prices in 2019.