2 contrarian transportation plays
Tech expert finds opportunity in rails and airlines.
By Bernie Schaeffer, Schaeffer's Investment Research
Our stock picks are based on a proprietary strategy known as "expectational analysis" which combines fundamental, technical and contrarian-based sentiment metrics.
Union Pacific has been an outperformer, posting a year-to-date gain of 11% and a 52 week return of 32%. Despite this outperformance, and the continued strength in the transportation sector, skepticism toward UNP remains.
The Schaeffer's put/call open interest ratio, which measures the front three months of open interest for UNP, currently stands at 1.78.
This ratio is in the 87th percentile of all ratios within the last 52 weeks, and indicates a high number of bearish bets toward the equity.
Short interest, as a percentage of the stock's float, has also increased over 44% in the past month.
Finally, while there are currently 17 buy ratings, eight analysts maintain a "hold" rating. Any future strength from UNP could lead to upgrades, thus driving the shares higher.
Meanwhile, airlines have been very strong and United Continental Holdings is certainly no exception, and has posted a year-to-date gain of 28%.
Short interest, as a percentage of the stock's float, is over 7%. Additionally, the Schaeffer's put/call open interest ratio currently stands at 1.85.
This heavy bias of puts could lead to an unwinding of these bearish bets, which could then act as a tailwind toward the equity.
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With the universe of this category in its seasonal sweet spot, these picks have tailwinds propelling them into the new year.
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