A positive earnings reaction next week could lift the shares
January has been kind to the stock market so far, with the S&P 500 Index (SPX) on pace for a monthly gain of more than 6% -- set for its best month since March 2016. What's more, February could be even kinder to a handful of SPX stocks, if recent history is any indicator. Below we outline the 25 best stocks to own in February, including Apple supplier Skyworks Solutions Inc (NASDAQ:SWKS), which reports earnings next week.
Looking back 10 years, the following stocks have performed the best in the month of February, per Schaeffer's Senior Quantitative Analyst Rocky White. To make the cut, stocks needed at least eight years' worth of historical data.
SWKS has averaged a one-month gain of 13.29% in February, and has ended the month higher 80% of the time. That's the second-best average return on the list, with only Priceline (PCLN) -- now Booking Holdings (BKNG) -- ahead of SWKS. Last February, in fact, the equity surged 14.2%.
Since touching a two-year low of $60.11 on Jan. 3, Skyworks shares have been on fire. The stock has added more than 20% in this timeframe, and is pacing for a January gain of more than 8.6% -- which would mark its best month since last February. Plus, SWKS recently took out its 60-day moving average, which capped rebound attempts in the second half of 2018. From the equity's current perch at $72.79, another 13.29% pop next month would place it around $82.46 -- territory not charted since an early November post-earnings bear gap.
Specifically, the shares dropped 8.1% on Nov. 9, following Skyworks Solutions' last earnings release. It marked the second straight negative earnings reaction for the shares. On average, SWKS has moved 6.3% the day after the firm's last eight earnings reports, regardless of direction.
This time around, the options market is pricing in a 9.2% swing after Skyworks reports after the close on Tuesday, Feb. 5. As far as direction, traders have been leaning bullishly. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 1.46 is in the 65th percentile of its annual range, pointing to a healthier-than-usual appetite for long calls over puts in the past two weeks.
However, should Skyworks report stronger-than-expected earnings like partner Apple, a round of upgrades could add fuel to the fire. Currently, half of the 24 analysts following SWKS maintain tepid "hold" or "sell" ratings.