Top picks 2013: First Solar, M&T Bank
A speculative solar play and a conservative bank both rank as top contrarian buys for the new year.
Our top speculative play is alternative energy concern First Solar (FSLR), which has been on a tear during the last six months, more than doubling in value over this time frame.
Regional lender M&T Bank Corp. (MTB) has been a technical standout, handily outperforming the benchmark S&P 500 Index with its gain of roughly 29% over the past 52 weeks. It is our top conservative pick for 2013.
First Solar has created an orderly pattern of higher highs and higher lows since its June 2012 bottom, and recently broke out of an ascending triangle pattern -- suggesting the next leg higher is now underway.
With a lofty 41% of its float sold short, the potential for a short-squeeze rally is high. At the stock's average daily trading volume, it would take more than four full days for all of these bearish bets to be covered.
Meanwhile, analysts have yet to recognize FSLR's technical resurgence. The shares have garnered only three "buy" ratings from brokerage firms, compared to 21 "hold" or "sell" suggestions. A round of well-deserved upgrades could further fuel FSLR's positive momentum.
M&T Bank Corp.
M&T's stock is now establishing a foothold above former resistance in the $96 to $98 area, but Wall Street remains almost unanimously bearish toward MTB.
During the last 20-day and 50-day periods, there have been more puts than calls bought to open on the bank stock, according to volume data from the International Securities Exchange, Chicago Board Options Exchange, and NASDAQ OMX PHLX.
Likewise, short sellers have ramped up their bearish exposure to the stock by 67% during the past four months. Shorted shares now account for more than 6% of the equity's float, and it would take approximately two weeks for all of these pessimistic positions to be covered.
Finally, 13 out of 19 analysts maintain a downbeat "hold" rating on MTB, despite its impressive technical performance. As this legion of skeptics is forced to admit defeat, an unwinding of bearish sentiment could be a boon for MTB going forward.
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Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
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