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This is a follow-up to an article we did a few days ago, wherein we identified breakout stocks based on moving average trends. All of the stocks mentioned have recently seen the SMA50 move above the SMA200 (a bullish signal called the "Golden Cross").

All of the stocks mentioned before have low levels of risk, as defined by the RiskGrade ratings developed by the RiskMetrics Group (RMG). RiskGrades is calibrated to be more intuitive and easier to use than standard deviation or beta. According to the company, their rating system captures all the components of market risk: equity, interest rate, currency, and commodity risk.

The lower the RiskGrade rating, the lower the risk level of the stock. Leggett & Platt, Incorporated (NYSE:LEG), the company with the highest rating in our list (i.e. the riskiest stock mentioned below), has a RiskGrade rating of 90, which means that it is less risky than 82% of the tickers on U.S. markets.

To add more perspective to the list, we went through the options’ market positioning on these names, and tried to find companies that have a very large number of open call option contracts relative to put option contracts.

RiskGrades sourced from RiskMetrics group, options data sourced from Schaeffer's, short float and performance data sourced from Finviz.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.


The list has been sorted by the Put/Call ratio. Note: Data sourced on Thursday afternoon, January 27.

1. Redwood Trust Inc. (NYSE:RWT):
REIT. Market cap of $1.19B. RiskGrade rating at 77.

Momentum Trends: SMA50 at $14.58 vs. SMA200 at $14.45 (current price at $15.28).

Options Market: Call open interest at 6,626 contracts vs. put open interest at 800 contracts (Put/Call ratio at 0.12).

Other Sentiment Data: Short float at 4.84%, which implies a short ratio of 7.44 days. The stock has gained 14.12% over the last year.

Recent Developments: Announced that Martin S. Hughes will be promoted to Chief Executive Officer and President on May 18, 2010 (March 2010).

2. Leggett & Platt, Incorporated:
Home Furnishings & Fixtures Industry. Market cap of $3.4B. RiskGrade rating at 90.

Momentum Trends: SMA50 at $22.05 vs. SMA200 at $21.48 (current price at $23.23).

Options Market: Call open interest at 12,657 contracts vs. put open interest at 2,802 contracts (Put/Call ratio at 0.22).

Other Sentiment Data: Short float at 2.64%, which implies a short ratio of 2.71 days. The stock has gained 23.11% over the last year.

Recent Developments: Announced a dividend of $.27 per share for the fourth quarter, a 3.8% increase versus the dividend declared in the fourth quarter 2009 (Nov.2010).

3. FirstEnergy Corp. (NYSE:FE):
Electric Utilities Industry. Market cap of $12.04B. RiskGrade rating at 63.

Momentum Trends:
SMA50 at $36.88 vs. SMA200 at $36.31 (current price at $39.49).

Options Market: Call open interest at 20,267 contracts vs. put open interest at 5,207 contracts (Put/Call ratio at 0.26).

Other Sentiment Data:
Short float at 9.99%, which implies a short ratio of 9.12 days. The stock has lost 4.27% over the last year.

Recent Developments: FirstEnergy Corp. and Allegheny Energy, Inc. announced that they were notified that the U.S. Department of Justice (DOJ) completed its review of the companies’ proposed merger and has closed its investigation (Jan. 2011)

4. Rockwell Collins Inc. (NYSE:COL):
Aerospace/Defense Products & Services Industry. Market cap of $10.06B. RiskGrade rating at 80.

Momentum Trends: SMA50 at $58.75 vs. SMA200 at $58.3 (current price at $64.9).

Options Market: Call open interest at 4,391 contracts vs. put open interest at 1,187 contracts (Put/Call ratio at 0.27).

Other Sentiment Data: Short float at 0.94%, which implies a short ratio of 1.15 days. The stock has gained 23.78% over the last year.

Recent Developments: Raised fiscal 2011 guidance earnings per share (EPS) to be in the range of $3.85 to $4.05 (Jan. 2011). Announced its acquisition of Computing Technologies for Aviation, Inc., a provider of flight operations management solutions for corporate flight departments and other aviation customers (Jan. 2011).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 4 Low-Risk Breakout Stocks With Low Put/Call Ratios