Contrarian Ideas: 10 Stocks Hitting New Highs on Rising Put Volume

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 |  Includes: A, AFG, COST, DOW, EEP, FIS, GTE, IBM, TYC, WFM
by: Kapitall

The following is a list of stocks that have reached a new 52-week high during recent sessions. These stocks have also seen a recent increase in the Put/Call ratio, which is based on open interest of option contracts.

In addition, the Put/Call ratios of these companies are at the upper end of their annual ranges.

With the number of put option contracts growing so rapidly relative to call option contracts, do you think these stocks are set for a correction? If you're a contrarian, this pessimism might raise a flag. Full details below.

Options data sourced from Schaeffer's, short float and performance data sourced from Finviz. (Please note: All changes in the Put/Call ratio occurred between 1/26 - 2/8.)

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six 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 change in the Put/Call ratio.

1. Fidelity National Information Services, Inc. (NYSE:FIS): Business Services Industry. Market cap of $9.32B.

Put/Call ratio increased from 0.33 to 1.15 (+248.48% change). Short float at 1.1%, which implies a short ratio of 2.31 days. The stock has gained 36.09% over the last year.

Other Highlights:

- The company appears to be undervalued relative to book value. Price/Book ratio at 1.41, much lower than the industry average of 11.58.

- The company outperformed analyst earnings estimates during the most recent quarter, suggesting that the analyst community is underestimating the stock. The company reported earnings per share of $0.64 per share, and exceeded the First Call Consensus of $0.51 (Q4 Earnings on 02/08/11). The company also outperformed analyst estimates over the last year, reporting earnings per share at $2.02, beating the consensus view at $1.98 (based on the estimates of 18 analysts).

2. American Financial Group Inc. (NYSE:AFG): Property & Casualty Insurance Industry. Market cap of $3.67B.

Put/Call ratio increased from 0.23 to 0.74 (+221.74% change). Short float at 0.69%, which implies a short ratio of 1.73 days. The stock has gained 42.95% over the last year.

Other Highlights:

- When comparing the company's price relative to earnings, it's clearly undervalued. The P/E ratio, based on the most recent quarter's earnings, stands at 6.92, lower than the industry average at 11.72, while the P/E ratio, based on trailing twelve month earnings, stands at 7.83, which is lower than the industry average at 11.35. The company also appears to be undervalued relative to projected earnings growth. PEG ratio at 0.87, vs. an industry average at 1.67.

- Judging by trailing twelve month (TTM) ratios like Return on Equity (ROE), Return on Assets (ROA) and Return on Invested Capital (ROI), it's clear that the company's management is doing an excellent job. TTM ROE at 10.95%, higher than the industry average at 8.51%, TTM ROA at 1.54% vs. the industry average at 1.95%, and TTM ROI at 9.52%, higher than the industry average at 6.59%. The company also outperformed its industry competitors in terms of the TTM Return on Sales ratio (10.6% vs. the industry average at 7.14%).

3. Gran Tierra Energy, Inc. (NYSEMKT:GTE): Independent Oil & Gas Industry. Market cap of $2.22B.

Put/Call ratio increased from 0.23 to 0.54 (+134.78% change). Short float at 0.47%, which implies a short ratio of 1.27 days. The stock has gained 88.64% over the last year.

Other Highlights:

- The company's capital spending accelerated by 56.19% over the last five years, much faster than the industry average of 19.66%. At least theoretically, this makes them more competitive over the coming years, since their operational assets are more up-to-date.

- Over the last year, the company has proven itself to be more profitable than its industry competitors. Trailing twelve month (TTM) gross margin at 83.62%, higher than the industry average at 36.65%. TTM EBITD margin at 73.13% vs. industry average at 30.61%, while TTM operating margin came in at 32.79%, higher than the industry average at 16.33%. The company also outperformed with its pretax margin, reporting a ratio of 27.23%, higher than the industry average at 15.84%.

4. Costco Wholesale Corporation (NASDAQ:COST): Discount, Variety Stores Industry. Market cap of $32.41B.

Put/Call ratio increased from 1.17 to 2.52 (+115.38% change). Short float at 1.92%, which implies a short ratio of 2.8 days. The stock has gained 29.42% over the last year.

Other Highlights:

- The company has low debt and great liquidity, which significantly reduces its risk over the coming months. During the most recent quarter, the total Debt/Assets ratio stood at 8.32% vs. the industry average at 21.93%. Total Debt/Equity came in at 19.35%, lower than the industry average at 59.86%. The company also appears to be more liquid than its competitors. The TTM Current Ratio stands at 1.17, higher than the industry average at 1.13. (Note: All ratios based on the most recent quarter, annualized)

5. International Business Machines Corp. (NYSE:IBM): Diversified Computer Systems Industry. Market cap of $204.77B.

Put/Call ratio increased from 1.25 to 2.13 (+70.40% change). Short float at 1.03%, which implies a short ratio of 2.59 days. The stock has gained 37.2% over the last year.

Other Highlights:

- Judging by trailing twelve month (TTM) ratios like Return on Equity (ROE), Return on Assets (ROA) and Return on Invested Capital (ROI), it's clear that the company's management is doing an excellent job. TTM ROE at 67.14%, higher than the industry average at 56.2%, TTM ROA at 13.82% vs. the industry average at 13.09%, and TTM ROI at 30.05%, higher than the industry average at 25.35%. However, it's worth pointing out that the company underperformed its industry competitors in terms of the TTM Return on Sales ratio (14.85% vs. the industry average at 17.2%).

6. Whole Foods Market, Inc. (WFMI): Grocery Stores Industry. Market cap of $9.16B.

Put/Call ratio increased from 1.13 to 1.64 (+45.13% change). Short float at 7.29%, which implies a short ratio of 6.27 days. The stock has gained 91.9% over the last year.

Other Highlights:

- The company has demonstrated rapid cash flow growth over the last five years, which may lower their risk going forward. Five year average cash flow growth at 13.93%, much higher than the industry average at 9.12%.

- The company has low debt and great liquidity, which significantly reduces its risk over the coming months. During the most recent quarter, the total Debt/Assets ratio stood at 12.76% vs. the industry average at 21.93%. Total Debt/Equity came in at 21.43%, lower than the industry average at 59.86%. The company also appears to be more liquid than its competitors. The TTM Current Ratio stands at 1.62, higher than the industry average at 1.13. (Note: All ratios based on the most recent quarter, annualized)

- The company seems to be doing a good job managing its inventory and receivables, which provides more evidence of a solid management team. Trailing twelve month Inventory Turnover ratio came in at 17.25, higher than the industry average at 9.75, while trailing twelve month receivables turnover came in at 73.21 vs. the industry average at 69.97.

7. Enbridge Energy Partners LP (NYSE:EEP): Oil & Gas Pipelines Industry. Market cap of $7.9B.

Put/Call ratio increased from 0.87 to 1.23 (+41.38% change). Short float at 0.86%, which implies a short ratio of 2.21 days. The stock has gained 36.79% over the last year.

Other Highlights:

- Insiders appear to be relatively optimistic on the outlook for the company. On a net basis, they've purchased an average of 3,323 shares per year (over last 2 years).

8. Agilent Technologies Inc. (NYSE:A): Scientific & Technical Instruments Industry. Market cap of $15.48B.

Put/Call ratio increased from 0.63 to 0.73 (+15.87% change). Short float at 1.47%, which implies a short ratio of 1.52 days. The stock has gained 52.19% over the last year.

Other Highlights:

- Over the last year, the company has proven itself to be more profitable than its industry competitors. Trailing twelve month (TTM) gross margin at 58.76%, higher than the industry average at 55.02%. TTM EBITD margin at 19.29% vs. industry average at 16.22%, while TTM operating margin came in at 15.63%, higher than the industry average at 11.3%. The company also outperformed with its pretax margin, reporting a ratio of 12.67%, higher than the industry average at 5.16%.

9. Tyco International Ltd. (NYSE:TYC): Diversified Machinery Industry. Market cap of $21.98B.

Put/Call ratio increased from 1.02 to 1.18 (+15.69% change). Short float at 1.14%, which implies a short ratio of 1.28 days. The stock has gained 39.55% over the last year.

Other Highlights:

- Judging by the company's cash holdings, shares look to offer good value at current levels. Price / Cashflow per Share, based on the most recent quarter's cash flow numbers, came in at 6.82, lower than the industry average of 11.62. It's also worth pointing out that the company's trailing twelve month Price / Cashflow per Share came in at 8.82, lower than the industry average of 10.77.

10. The Dow Chemical Company (NYSE:DOW): Chemicals Industry. Market cap of $43.67B.

Put/Call ratio increased from 1.16 to 1.31 (+12.93% change). Short float at 1.96%, which implies a short ratio of 3.24 days. The stock has gained 46.72% over the last year.

Other Highlights:

- The company outperformed analyst earnings estimates during the most recent quarter, suggesting that the analyst community is underestimating the stock. The company reported earnings per share of $0.47 per share, and exceeded the First Call Consensus of $0.35 (Q4 Earnings on 02/03/11). The company also outperformed analyst estimates over the last year, reporting earnings per share at $1.97, beating the consensus view at $1.86 (based on the estimates of 17 analysts).

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