There are many indicators I use when analyzing a stock. One indicator I look for are relatively cheap dividend stocks. Another strong indicator is insider buying, such as the ones described here. Finally, another indicator is looking at unusual option activity, as I recently brought up here, while some on Oct. 10 caught my eye:
Superior Energy Services (SPN) provides specialized oilfield services and equipments to serve the production and drilling-related needs of oil and gas companies. Option volume exploded higher with the Oct $25 calls and Oct $20 puts showing specifically strong volume. Investors didn't like the proposed acquisition of Complete Production and pushed the stock almost 14% lower. The stock doesn't look overly expensive or cheap at 18.9x P/E, 1.6x P/B and 1.65x EV/S now after the big drop. However, I'd be cautious with the stock going forward as this is a big acquisition for the company and can prove to be costly when trying to merge companies.
Avery Dennison (AVY) engages in the manufacture and sale of pressure-sensitive materials; office and consumer products; and various tickets, tags, labels, and other converted products worldwide. Option volume was very strong, particularly in the Oct $25 puts and Nov $30 calls. The stock looks reasonably cheap at 9.7x P/E, .4x P/S, and secure 3.7% dividend yield. This stock is a solid buy and can make for a nice covered call play, as its call options are showing some nice premiums while collecting the respectable dividend.
Invesco Agency Securities (IVR) operates as a mortgage real estate investment trust. There was particularly strong volume in the April $15 calls as the stock closed up just below 3%. The stock looks cheap now at 3.5x P/E, .7x P/B while earning over 2.6% return on assets and 16.5% return on equity, and 22.6% dividend yield. I'd be a buyer here.
China Unicom (Hong Kong) (CHU) acts as an investment holding company, engages in the provision of GSM and WCDMA cellular, and related telecommunications services in the People's Republic of China. Option volume was very high, particularly in the Oct $19 calls and Oct $18 puts. The stock looks rather expensive trading at a trailing 82x P/E and forward 22x P/E, 2x EV/S, and massive debt load over $14.5B and negative net cash position of approximately $12B. I'd avoid the stock.
The Cheesecake Factory (CAKE) operates upscale, casual, and full-service dining restaurants in the United States. There was strong put option activity, specifically in the Oct $23, $24, and $25 strike prices. The stock shows some reasonable value at 17.6x P/E, .9x EV/S, and 7.7x EV/EBITDA. This stock is a reasonable buy here right near its 52-week low.
Pharmaceutical Product Development (PPDI), a contract research organization, provides drug discovery, development, and life-cycle management services. There was very strong volume of 1,500 call Nov contracts specifically as the company said it seeks $2.2B in leverage buyout financing. I'm indifferent toward the stock, as it has already agreed to be bought out by Caryle and Hellman & Friedman.
Zimmer Holdings (ZMH), through its subsidiaries, engages in the design, development, manufacture, and marketing of orthopedic reconstructive implants, spinal and trauma devices, dental implants, and related surgical products. The stock had strong option activity throughout the months, specifically at the Oct $50 and $55 puts. The stock looks decently priced at a 16.5x trailing P/E and 10.3x forward P/E, 6.7x EV/EBITDA, and over $1.1B in FCF this past year translating to approximately a 9x EV/FCF. This company has very strong margins and churning a good deal of FCF, I think this is a safe long-term buy.