It’s been a tough few months for a top home improvement retailer Home Depot Inc. (NYSE:HD). Shortly after the company suffered a post-earnings liquidation in February, compounded by a beat and raise from main competitor Lowe’s – the security hit an eight-month low just above the $299 level. While Home Depot stock managed to distance itself from this rout, the 40-day move quickly sent the stock to even lower levels late last week. Hope may not be completely lost, however, as equity has seasonality on its side, which could help guide HD to a win in April.
To be more specific, Home Depot stock just landed on Schaeffer’s senior quantitative analyst Rocky White’s list of the best-performing S&P 500 stocks in April, dating back 10 years. According to this data, Home Deport stock has posted positive one-month returns 90% of the time, with an average jump of 4.3% over this period. From HD’s current perch of $303.17, a similar move would pull the stock back to the top of the $316 level. And while those gains seem relatively small compared to some others on the list, equity is the only blue-chip stock and member of the retail industry that made the cut.
An unraveling of the pessimism in the option wells could put additional wind at the back of equities. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX), HD has a 50-day put/call ratio of 1.25, which exceeds 91% of all annual readings. In other words, long puts are recovered at a faster rate than usual.
Now may be the perfect time to speculate on HD’s next move with options as well. The stock’s Schaeffer Volatility Index (SVI) of 48% is in the lower quartile of its 12-month range. In other words, options traders are currently pricing in relatively low volatility expectations. Additionally, the stock boasts a Schaeffer Volatility Scorecard (SVI) of 91 (out of a possible 100), implying that HD tends to outperform said volatility expectations.
7 risky stocks to buy as inflation remains at record highs
Inflation has gone from a transitory problem that would take care of itself to an existential threat that drives the Federal Reserve to take swift and aggressive action. In January 2022, the Consumer Price Index (CPI) showed that inflation in the United States was at its highest level since 1982.
And the market is reacting predictably with what appears to be a shift from risk assets to risk assets. This is having a negative effect on many stocks, especially in the technology sector, which no longer justify their extended valuations.
But investors are also seeing falling prices for cryptocurrencies and other speculative assets. This may be a short term phenomenon, but if you are an investor looking to make money in 2022; it’s time to get a little defensive. But playing defensive doesn’t mean accepting mediocre growth. It simply means looking to stocks and sectors that are likely to benefit from high inflation and rising interest rates.
This is the subject of this special presentation. We urge you to consider these seven risky stocks that seem strong candidates to rise in value even if inflation remains elevated.
Check out “7 Risky Stocks to Buy as Inflation Remains at Record Highs”.