2 red-hot companies rising while the market sinks
US Bancorp and WellPoint look like trend-followers' friends.
One of my favorite strategies to park money overnight is through dividend capturing. When timed and executed properly, dividend capturing is a relatively low-risk method of enhancing yields through hedging techniques.
I haven't captured many lately because of market correction fears. There is a saying on Wall Street that you "shouldn't pick up nickels in front of a steam roller," and I believe it's true.
In my options newsletter, I warned for weeks that dividend capturing wasn't worth the risk because option premium was relatively small (for an overall market gauge, you can look at the iPath S&P 500 VIX Short-Term (VXX) to measure fear).
Two companies that don't care which direction the market is headed are U.S. Bancorp (USB) and WellPoint (WLP). Both companies are in the financial space, near 52-week highs and should have your attention.
U.S. Bancorp is a financial services holding company and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions. If you follow me on Twitter, or read my bullish U.S. Bancorp articles on TheStreet, you know I've been bullish on U.S. Bancorp before 2013.
My optimism continues. The fundamentals are solid and the chart is a trend follower's dream. Even after the share price gains this year, the forward P/E ratio is only 10.9. I view short-sellers as the smart money on Wall Street.
Only 1% of the float is short, about as small of a short ratio as you will find and a clear indication that few professionals are betting the shares are overvalued. U.S. Bancorp lets you have your cake and eat it, too. The dividend yield is 2.6% and with a small payout ratio. Investors can expect future dividend increases based on historical adjustments.
From a technical perspective, the widely followed 200-day moving average is trending higher at a moderate and sustainable pace. Money continues to flow into the stock, elevating the shorter time period moving averages above the 200-day average.
Technically, this stock should be accumulated on dips until the trend is broken. Bullish trends often will make their biggest move at the end; leaving the impression US Bancorp has plenty of upside potential.
WellPoint is the largest publicly traded commercial health benefits company in terms of membership in the United States. Wellpoint trades an average of 1.8 million shares per day with a marketcap of $24 billion.
On Monday, WellPoint climbed to a new 52 week high and is up over 15% in the last year. During the last month alone, shareholders witnessed shares climb in value over 6.5%.
As strong as WellPoint has been during the last few months, the chart remains impressive for the bullish thesis. Monday's break above the 52-week high is based on a trading range started over a month ago. I see this type of price action in stocks that are moving towards a newer and higher price range.
We can all agree the few short-sellers of WellPoint aren't feeling well lately, and I wouldn't expect many will join the few that made the mistake of shorting. Currently, short interest is 1.7% of the float, a relatively small amount.
Similar to U.S. Bancorp's chart, trend followers will hold a long position in WellPoint's chart until the pattern fails. It doesn't appear a breakdown is imminent, but I prefer not to chase stocks. If you're interested in WellPoint, I recommend watching and waiting for a buying dip near $79 or selling put options as a hedging tool.
At the time of publication the author had no position in any of the stocks mentioned.
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