Stocks with unusual volume can often be a good place to look for a trade. By unusual volume I mean stocks that trade significantly more than the average daily volume of shares. This signifies unusual interest in the issue and often indicates that investors have a changing opinion in the stock and may indicate an inflection point that is good for a trade.
Below are five stocks that are showing unusual trading volume today that should be considered for further analysis and a possible trade. Note that volume and price information is as of approximately 12:30 EST
Boston Beer Co. Inc. (SAM)
The Boston Beer company announced improved expectations for 2012 EPS after the close last night. The stock is up 15% on volume that is over five times the average daily volume. I think the stock may be setting up for a short as outlined in my prior article.
Infinity Pharmaceuticals, Inc. (INFI)
Infinity Pharmaceuticals priced an underwritten registered public offering of 5.7M shares at the price of $26.33 per share. The stock is up 7% on volume that is over four times the average daily volume. Infinity is a drug discovery and development company that has a number of drugs in various stages of the FDA approval process. The proceeds are intended for a number of uses including clinical development for their leading compound for hematologic malignancies and rheumatoid arthritis. Infinity had $189M in cash and securities as of September 30th. The offering provides them with roughly an additional $150M in cash minus underwriting costs. For the first nine months their operating expenses were $99M so they have plenty of cash to continue the work on their drug candidates. As they had essentially no revenue last quarter, fundamental analysis of the company requires an understanding of the probability of FDA approval and the market for their products going forward. Some of those fundamentals are discussed here.
Best Buy Co. Inc. (BBY)
Best Buy is trading unusual volume after reports that the founder, Richard Schulze, will take submit an offer to take the company private. The stock is up 15% on volume that is over four times the average daily volume. Best Buy has run into issues as the showrooming trend has made sales more difficult. For the third quarter their comparable store sales dropped 4.3% and revenue dropped 3.5%. They reported a third quarter EPS of -$0.03 versus $0.43 in Q3'2011. I don't like the fundamentals of Best Buy as they are in a secular decline and I don't generally like to buy a company primarily on the possibility of a buyout. Here is a more detailed summary of the situation at Best Buy that readers will find useful.
Charles River Laboratories International, Inc. (CRL)
Charles River is up 3% and has traded more than twice the average daily volume. Yesterday, the stock had a 9.3% drop in price after the preclinical services provider dropped upon reporting a weak 2013 outlook. Their 2013 Non-GAAP EPS guidance is $2.80-$2.90 whereas their 2012 Non-GAAP EPS guidance is $2.68-$2.73. The increased activity today is likely due to investors buying the dip after upgrades from Wells Fargo and JPMorgan. While it looks like there is upside here I normally prefer situations with high growth so I will take a pass although the growth may be attractive to other investors with more modest expectations.
CVS Caremark (CVS)
CVS Caremark is trading roughly twice the average daily volume and is up 2%. This morning they announced strong earnings expectations for 2013 which exceeded analyst expectations, a 38% dividend increase, news on their repurchase agreement, and stock buyback news. They are guiding for 2013 adjusted EPS in the range of $3.84 to $3.98 which is up 13% to 17% from their expectations of 2012 adjusted EPS in the range of $3.38 to $3.41. I like the sector as the Affordable Care Act (ACA) should drive additional customers with 30M newly-insured Americans. I plan to investigate this stock further as I find the growth rate and macro trends to be attractive. Also, it may be good to look at other companies in the industry as there may be even more attractive candidates.