In reality, every member of the S&P 500 (^GSPC 1.33%) moves the index on a daily basis. However, the stocks of the two companies below are likely to make outsized moves that will deliver a notable impact this week. Both are reporting earnings, and they have a large number of investors shorting -- i.e., betting against -- the performance of their stocks.
If recent history is any indication, this is a fairly reliable way to find volatile stocks. The three stocks I singled out last week moved an average 6.5% after the companies reported earnings. Here are the two companies to keep an eye on this week, what analysts are expecting, and why they're so heavily shorted.
|
Company |
% of Shares Short |
When to Watch |
Expected Revenue (millions) |
Expected EPS |
|---|---|---|---|---|
|
D.R. Horton (DHI 1.75%) |
15% |
Tuesday |
$1,800 |
$0.40 |
|
Kohl's (KSS 3.00%) |
11% |
Thursday |
$4,500 |
$0.86 |
Sources: E*Trade, finviz.com.
D.R. Horton
This company is in the business of building single-family, detached homes and multifamily residences. Horton also has a mortgage loan origination business to complement its core construction operation. Horton investors have had a rough ride this year, with shares trading down 9% while the overall market is up 25%.
Horton shares are presently trading for 14 times trailing earnings, which seems more than fair, especially considering that homebuilding is likely to double its rate over the next 10 years. It seems, however, that worries about a short-term slowdown in the housing market could pull homebuilders down. If that's the case, this could be a situation in which both the bears and bulls have it right, depending on the time frame of the investor.
Kohl's
This company operates approximately 1,100 department stores throughout the country. So far this year, shares are performing quite well, up 34% -- which is about nine percentage points better than the overall market.
A lot of investors were hoping that the mess of an executive situation at J.C. Penney (JCP +0.00%) and the lack of execution on any turnaround plan would help Kohl's capture more market share. J.C. Penney has shown year-over-year revenue losses of about $600 million in the last two quarters, but Kohl's hasn't shown a noticeable benefit; sales have been flat over the past two years.
Focusing on long-term trends, many investors are likely betting against the fate of brick-and-mortar retailers in the face of the growing e-commerce trend. Investors should pay particular attention to the company's guidance for the holiday season, as that will likely be the single largest factor determining how the market reacts on Thursday.
