Morning Quant Ride Feb 5, 2018

Feb 05, 2018

February 5, 2018

Traders’ Corner

Asian markets were mostly lower this morning, continuing Friday’s sell-off in US equities. The Nikkei 225 fell 2.55% in sympathy with a spike in volatility, mirroring the move in the VIX. Volume on the Tokyo Stock Exchange was 15.4% higher above its 10-day average. The Hang Seng fell 1.09%, while Shanghai rose 0.73%.

European markets are also lower with the FTSE 100 down 0.63%, DAX down 0.96%, and Euro STOXX 60 down 1.50%. Talks on forming a new government in Germany are continuing after political parties failed to reach an agreement.

US markets had their worst day of the year this past Friday with the S&P500 falling 2.12% following an economic report that suggested average hourly earnings accelerated year-over-year 2.9%  for the month of January 2018. The price performance of the S&P500 was one of the worst performing days of the last 12-months which raised concerns about a further market correction.  Those concerns have clearly carried over to this morning as US futures are pointing to another negative open with S&P500 futures down more than 50 bps this morning.  The VIX has jumped above 19 this morning after Friday’s move where it moved above 17 (after closing at ~13.47 on Friday).  While the recent correction in the US equities may be disconcerting to investors, we would like to highlight some important points that may dampen fears of a sharper market sell-off:

  • HYG, the high-yield ETF, was only down 0.63% on Friday while the TLT, the 20yr Treasury ETF, was 0.93%
  • While spot VIX is trading above 19, 1-month VIX is still below 17 (~16.5) and 2-month VIX is below 16 (~15.3).

If there were a real market correction occurring, we would expect HYG to be down much more vs. TLT.  The VIX futures curve should be upward sloping to reflect the impact of time on risk.  At the moment, the curve is sharply downward sloping on the front-end of the curve: spot – 1-month differential is currently -2.5 points.  The sharp negative differential between VIX futures and spot, we would expect VIX spot to normalize downwards.  Investors should keep in mind that the VIX merely represents the cost of hedging, as measured by implied volatility, on 1-month S&P500 options.  Once the put buying abates, the VIX will shift downwards.  Given these observations, we think it makes sense to focus on laggard on our A-rated laggards from our recently released February models. We believe the current market selloff could be a great buying opportunity for investors.

QuantShot: Advanced Energy Industries - 26.64% off its 52wkH

QuantShot: Alibaba - 9.16% off its 52wkH

QuantShot: Alphabet - 6.58% off its 52wkH

QuantShot: Baidu - 15.20% off its 52wkH, reports earnings on 2/14

Big Lots - 10.37 off its 52wkH, reports earnings on 3/02

QuantShot: Choice Hotels - 3.92% off its 52wkH, reports earnings on 2/20

Cirrus Logic - 35.04% off its 52wkH, reports earnings on  2/06

QuantShot: Cummins - 5.08% off its 52wkH, reports earnings on 2/06

Daqo New Energy Corp - 29.02% off its 52wkH, reports earnings on 3/22

Dunkin Brands - 8.93% off its 52wkH, reports earnings on 2/06

QuantShot: FedEx - 6.84% off its 52wkH, reports earnings on 3/21

First Data Corporation - 10.82% off its 52wkH, reports earnings on 2/12

QuantShot: Home Depot - 6.57% off its 52wkH, reports earnings on 2/20

Momo - 36.11% off its 52wkH, reports earnings on 3/07

QuantShot: NetApp - 5.99% off its 52wkH, reports earnings on 2/15

Paccar - 8.90% off its 52wkH

PetMed Express - 25.14% off its 52wkH

QuantShot: Six Flags Entertainment - 5.42% off its 52wkH, reports earnings on 2/20

QuantShot: Stanley Black & Decker - 7.24% off its 52wkH

Target - 7.31% off its 52wkH, reports earnings on 3/06

QuantShot: Thor Industries - 18.75% off its 52wkH, reports earnings on 3/08

VeriFone Systems - 19.60% off its 52wkH, reports earnings on 3/08

QuantShot: Weibo - 10.83% off its 52wkH, reports earnings on 3/13

QuantShot: World Wrestling Entertainment - 3.71% off its 52wkH, reports earnings on 2/08

QuantShot: Wynn Resorts - 18.20% off its 52wkH

YY Inc. - 10.25% off its 52wkH, reports earnings on 3/08

Our Top Picks in the News

Click headline for story

World Wrestling Entertainment (WWE)

Can WWE Benefit from Launch of New Professional Football League (Seeking Alpha) 
World Wrestling Entertainment (WWE) PT Raised to $41 at MKM Partners, Remains Top Pick

Top Conviction Buy in February, please see Quantamize Global Top Picks US Consumer Discretionary report

See more on our WWE QuantShot company report from January 22nd

Home Depot (HD)

Tesla, Home Depot Tie-in’s Success Will Hinge on Consistency (MarketWatch)

Top Conviction Buy in, please see Quantamize Global Top Picks US Consumer Discretionary report

See more on our Home Depot QuantShot company report from January 10th

Yum! Brands (YUM)

Yum! Brands Makes Investment Attractive With Dividend Hike (Zacks)

Top Conviction Buy in February, please see Quantamize Global Top Picks Consumer Discretionary report

See more on our Yum! Bands Q-Options trade idea from February 1st

Kellogg (K)

Kellogg initiated with a Buy at Pivotal Research

Top Conviction Buy in February, please see Quantamize Global Top Picks US Consumer Staples report

See more on our Kellogg QuantShot company report from October 25th

Motorola (MSI)

Kellogg initiated with a Buy at Pivotal Research
Top Conviction Buy in February, please see Quantamize Global Top Picks US Info Tech report

The Morning Recap

Global Indices

Index

Price

1 Day Return

5 Day Return

MTD

YTD

S&P 500

$ 2,762.13

0.00%

-3.20%

-2.18%

3.31%

Russell 2000

$ 1,547.27

0.00%

-3.18%

-1.76%

0.77%

DJ Industrial Average

$ 25,520.96

0.00%

-3.47%

-2.40%

3.24%

NASDAQ Composite Index

$ 7,240.95

0.00%

-3.02%

-2.30%

4.89%

CBOE Market Volatility Index

19.02

-

-

-

-

Germany DAX (TR)

€ 12,661.89

-0.96%

-4.05%

-3.96%

-1.03%

France CAC 40

€ 5,287.34

-1.45%

-2.84%

-3.53%

0.99%

Japan Nikkei 225

¥ 22,682.08

-2.55%

-1.50%

-1.80%

2.24%

Hang Seng Index

¥ 32,245.22

-1.09%

-1.11%

-1.95%

8.97%

Hang Seng China Enterprises

¥ 13,479.83

-0.43%

-0.89%

-0.60%

15.62%

S&P ASX 200

AUD 6,026.20

-1.56%

0.76%

-0.19%

0.93%

Source: FactSet          

Large Cap Conviction Buy Movers

Large Cap A Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
DECKERS OUTDOOR CORP DECK Consumer Discretionary Textiles, Apparel & Luxury Goods

7.30%

-1.33%

8.74%

MOTOROLA SOLUTIONS INC MSI Information Technology Communications Equipment

4.79%

0.12%

9.72%

WESTROCK CO WRK Materials Containers & Packaging

1.45%

-5.68%

4.86%

ROPER TECHNOLOGIES INC ROP Industrials Industrial Conglomerates

1.40%

-1.02%

8.59%

NUVASIVE INC NUVA Health Care Health Care Equipment & Supplies

1.30%

-5.70%

-17.08%

Large Cap A Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
ALPHABET INC GOOGL Information Technology Internet Software & Services

-5.28%

-0.50%

12.17%

ENTERCOM COMMUNICATIONS CORP ETM Consumer Discretionary Media

-4.95%

1.37%

2.78%

LENNAR CORP LEN Consumer Discretionary Household Durables

-4.49%

-7.34%

-0.63%

MARRIOTT INTL INC MAR Consumer Discretionary Hotels, Restaurants & Leisure

-3.91%

0.23%

7.90%

ADVANCED ENERGY INDS INC AEIS Information Technology Semiconductors & Semiconductor Equipment

-4.30%

-1.13%

7.91%

Source: FactSet            

Large Cap Conviction Short Movers

Large Cap F Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
MENLO THERAPEUTICS INC -REDH MNLO Health Care Pharmaceuticals

-12.69%

22.76%

-
LAREDO PETROLEUM INC LPI Energy Oil, Gas & Consumable Fuels

-7.76%

-1.90%

-7.63%

CARRIZO OIL & GAS INC CRZO Energy Oil, Gas & Consumable Fuels

-6.52%

-7.19%

-4.18%

ADAMAS PHARMACEUTICALS INC ADMS Health Care Biotechnology

-6.45%

-7.88%

13.43%

OASIS PETROLEUM INC OAS Energy Oil, Gas & Consumable Fuels

-6.40%

-1.44%

5.83%

Large Cap F Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
ARMO BIOSCIENCES INC -REDH ARMO Health Care Biotechnology

10.73%

1.18%

-
MATTEL INC MAT Consumer Discretionary Leisure Products

7.90%

-7.54%

-0.39%

DYNAVAX TECHNOLOGIES CORP DVAX Health Care Biotechnology

6.08%

-4.91%

-12.03%

SPRINT CORP S Telecommunication Services Wireless Telecommunication Services

5.10%

-5.03%

-13.41%

CHARTER COMMUNICATIONS INC CHTR Consumer Discretionary Media

4.40%

-1.54%

10.48%

Upcoming Earnings

Company Name Ticker Earnings Date
Fidelity National Information Services, Inc. FIS 02/06/2018
Laboratory Corporation of America Holdings LH 02/06/2018
Intercontinental Exchange, Inc. ICE 02/07/2018
Jack Henry & Associates, Inc. JKHY 02/07/2018
Euronet Worldwide, Inc. EEFT 02/07/2018
Cognizant Technology Solutions Corporation Class A CTSH 02/07/2018
Cerner Corporation CERN 02/07/2018
Regeneron Pharmaceuticals, Inc. REGN 02/08/2018
Snap-on Incorporated SNA 02/08/2018
Black Knight, Inc. BKI 02/08/2018
Sealed Air Corporation SEE 02/08/2018
Fiserv, Inc. FISV 02/08/2018
Prudential Financial, Inc. PRU 02/08/2018
Torchmark Corporation TMK 02/08/2018
FleetCor Technologies, Inc. FLT 02/09/2018
Entercom Communications Corp. Class A ETM 02/09/2018
First Data Corporation Class A FDC 02/12/2018
Ligand Pharmaceuticals Incorporated LGND 02/13/2018
Louisiana-Pacific Corporation LPX 02/13/2018
Service Corporation International SCI 02/13/2018
Snyder's-Lance, Inc. LNCE 02/14/2018
DaVita Inc. DVA 02/14/2018
Zoetis, Inc. Class A ZTS 02/15/2018
Cisco Systems, Inc. CSCO 02/15/2018
Pilgrim's Pride Corporation PPC 02/15/2018
NetApp, Inc. NTAP 02/15/2018
Marriott International, Inc. Class A MAR 02/15/2018
V.F. Corporation VFC 02/16/2018
SS&C Technologies Holdings, Inc. SSNC 02/16/2018

Line for QuantShots

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