The S&P 500 has fallen roughly 15% over the last month, and economist Andrew Smithers has some specific predictions on where it's headed next. He's expecting a "significant rally" off of today's levels, followed by decline, according to Bloomberg.
As for the rally, Smithers reasons that companies are carrying large amounts of cash, and when P/E ratios are low and cash ratios are high, companies are more likely to buy back shares, which can trigger a short-term rally.
Standard & Poor's 500 Index companies have about $291 in cash and short-term investments per share, according to data from Bloomberg. That's the highest since the data became available in 1998.
For the decline, Smithers said in a report dated Aug. 15 that the S&P 500 is still overvalued by about 43 percent relative to earnings for the past 10 years. Relative to the Q ratio, which compares market value with the replacement cost of assets, the index is about 36 percent too high, Smithers said.
He recommends that investors sell their holdings after a 10% gain.
We ran a screen on stocks from the S&P 500 for those with the most bullish options sentiment and most bullish short trends. Do you agree with options traders and short-sellers that these stocks are set to rally?
Use this list as a starting-off point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
1. NVIDIA (Nasdaq: NVDA): Semiconductor Industry. Market cap of $7.04B. Put/call ratio has decreased 20.55% over the last ten trading days (from 0.73 to 0.58). Shares shorted have decreased to 20.54M from 30.42M month-over-month, a change representing 1.71% of the company's 577.84M share float. It's been a rough couple of days for the stock, losing 8.93% over the last week.
2. V.F. Corporation (NYSE: VFC): Textile Clothing Industry. Market cap of $11.43B. Put/call ratio has decreased 43.59% over the last ten trading days (from 1.56 to 0.88). Shares shorted have decreased to 3.22M from 5.04M month-over-month, a change representing 1.67% of the company's 109.22M share float. The stock has performed poorly over the last month, losing 13.91%.
3. Clorox (NYSE: CLX): Housewares & Accessories Industry. Market cap of $8.53B. Put/call ratio has decreased 22.50% over the last ten trading days (from 0.8 to 0.62). Shares shorted have decreased to 4.09M from 5.66M month-over-month, a change representing 1.32% of the company's 119.31M share float. It's been a rough couple of days for the stock, losing 5.4% over the last week.
4. Accenture (NYSE: ACN): Management Services Industry. Market cap of $33.58B. Put/call ratio has decreased 36.65% over the last ten trading days (from 1.61 to 1.02). Shares shorted have decreased to 11.59M from 19.80M month-over-month, a change representing 1.28% of the company's 641.50M share float. It's been a rough couple of days for the stock, losing 13.13% over the last week.
5. AutoNation (NYSE: AN): Auto Dealerships Industry. Market cap of $5.21B. Put/call ratio has decreased 40% over the last ten trading days (from 2.4 to 1.44). Shares shorted have decreased to 11.51M from 12.10M month-over-month, a change representing 1.21% of the company's 48.58M share float. The stock is a short squeeze candidate, with a short float at 9.25% (equivalent to 11.31 days of average volume). The stock has gained 52.52% over the last year.
6. Walgreen (NYSE: WAG): Drug Stores Industry. Market cap of $31.19B. Put/call ratio has decreased 26.74% over the last ten trading days (from 0.86 to 0.63). Shares shorted have decreased to 17.34M from 27.51M month-over-month, a change representing 1.12% of the company's 904.50M share float. The stock has performed poorly over the last month, losing 12.56%.
7. Tyson Foods (NYSE: TSN): Meat Products Industry. Market cap of $6.24B. Put/call ratio has decreased 22.22% over the last ten trading days (from 0.54 to 0.42). Shares shorted have decreased to 17.87M from 20.99M month-over-month, a change representing 1.05% of the company's 297.25M share float. The stock has performed poorly over the last month, losing 10.93%.
8. Campbell Soup (NYSE: CPB): Processed & Packaged Goods Industry. Market cap of $9.64B. Put/call ratio has decreased 72.13% over the last ten trading days (from 1.22 to 0.34). Shares shorted have decreased to 17.45M from 18.82M month-over-month, a change representing 0.88% of the company's 156.28M share float. The stock is a short squeeze candidate, with a short float at 9.76% (equivalent to 6.06 days of average volume). The stock has performed poorly over the last month, losing 11.52%.
9. Moody's (NYSE: MCO): Business Services Industry. Market cap of $6.18B. Put/call ratio has decreased 23.35% over the last ten trading days (from 1.67 to 1.28). Shares shorted have decreased to 21.26M from 22.85M month-over-month, a change representing 0.86% of the company's 185.66M share float. The stock is a short squeeze candidate, with a short float at 9.32% (equivalent to 5.8 days of average volume). It's been a rough couple of days for the stock, losing 14.75% over the last week.
10. Cablevision Systems (NYSE: CVC): CATV Systems Industry. Market cap of $4.88B. Put/call ratio has decreased 67.32% over the last ten trading days (from 1.53 to 0.5). Shares shorted have decreased to 7.11M from 8.38M month-over-month, a change representing 0.57% of the company's 222.97M share float. Might be undervalued at current levels, with a PEG ratio at 0.68, and P/FCF ratio at 6.39. It's been a rough couple of days for the stock, losing 8.71% over the last week.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen does not own any of the shares mentioned above. Options data sourced from Schaeffers, short data sourced from Yahoo! Finance, all other data sourced from Finviz.
