ILMN and EW stocks tend to outperform in June
If recent history is any indicator, bullish stock and
options traders may want to consider a pair of biotechs before June kicks off on Thursday. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, two healthcare stocks tend to outperform in the month of June, going back 10 years: genetic analysis provider
Illumina, Inc. (NASDAQ:ILMN) and heart valve manufacturer
Edwards Lifesciences Corp (NYSE:EW). Below, we'll take a look at ILMN and EW stocks, as well as the 25 best stocks to own in June.
ILMN, EW Top 25 Best Stocks to Own in June
Below are the 25 best stocks to own next month, if the past 10 years is prologue. White looked at S&P 500 Index (SPX) components that have traded at least eight years, with ILMN topping the list. Illumina stock has averaged the best monthly return of all SPX components, tacking on a healthy 6.52%. Plus, ILMN has ended June higher 80% of the time over the past 10 years.
Edwards Lifesciences shares are a close second. EW stock has averaged a June gain of 5.95%, going back 10 years, and ended the month higher 80% of the time. In fact, ILMN and EW make up half the SPX stocks with a win rate of 80% in June.
Short Squeeze, Upgrades Could Push ILMN Stock Higher
Illumina shares have added nearly 38% in 2017, thanks to a massive mid-January
bull gap, stemming from the company's earnings forecast and new genetic sequencing platform. However, earlier this month, ILMN stock ran into a familiar wall in the $185-$190 neighborhood, which capped the stock's advances in mid-2016. This region also limited ILMN's momentum in late 2015. At last check -- and ahead of the company's annual shareholder meeting later today -- Illumina shares were fractionally higher at $175.95.
An unwinding of pessimism could certainly help ILMN extend its journey higher and barrel through resistance. Short interest on the stock represents a week's worth of pent-up buying demand, at ILMN's average pace of trading. Meanwhile, eight out of 18 analysts maintain "hold" or "strong sell" opinions of the shares, leaving the door open for potential upgrades to lure more buyers to the table.
For options traders hoping ILMN once again outperforms in June, its short-term contracts are very attractively priced right now; the stock's Schaeffer's Volatility Index (SVI) of 24% is at an annual low. Likewise, its Schaeffer's Volatility Scorecard (SVS) of 67 indicates Illumina stock has exceeded options traders' volatility expectations during the past year.
EW Options Trading at a Bargain
Edwards Lifesciences stock has also outperformed in 2017, up nearly 22% to sit at $114.05. The stock gapped higher in late April, thanks to solid
earnings and guidance, but has struggled to take out former support in the $115-$116 area -- where EW stock was trading before a massive bear gap in October.
An exodus of option bears could add fuel to Edwards' fire. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.52 is higher than 96% of all other readings from the past year. Meanwhile, the stock's Schaeffer's put/call open interest ratio (SOIR) is at an annual peak of 1.41, indicating near-term options traders have rarely been more put-heavy on EW stock.
Again, those looking for more June upside from EW shares can scoop up the stock's short-term options at a discount. The equity's SVI of 20% is lower than 99% of all other readings from the past 12 months, suggesting Edwards Lifesciences options are attractively priced, from a historical volatility standpoint. Plus, EW boasts an SVS of 77, suggesting the stock has made bigger moves than options traders had expected during the past year.