KR has intriguing short squeeze potential
Every day for the past week, we've been highlighting one of Schaeffer's top seven picks for 2022. Last Friday we hit on bank stock Charles Schwab (SCHW), and to kick off this week we look at a Cincinnati staple that is much more than a local favorite. To access the entirety of the 2022 report, click here.
Grocery chain Kroger Co (NYSE:KR) has seen strong price action in the last 18 months, even amid the uncertain times wrought by the pandemic and subsequent inflation. Investors may find this stability attractive amid such an uncertain time in the market. The shares recently gapped higher after an early-December earnings report and remain above their 2015 highs at $41.63.
Wall Street is far from enamored by KR though, and a shift in brokerage sentiment could provide tailwinds. Of the 15 analysts in coverage, 13 maintain "hold" or worse ratings. Short sellers, meanwhile, have been in covering mode for most of this year and could carry over into 2022. At the stock's average pace of trading, it would still take shorts four days to buy back their bearish bets; ample amount of buying power that can still hit the market and fuel an unwind. Kroger's dividend yield of 2% isn't necessarily a bullish driver, but it does make the stock an attractive option for those looking into adding companies offering enticing dividends to their 2022 portfolio.
Todd is the Senior Vice President of Research at Schaeffer's Investment Research and has been with the research firm since 1993. Mr. Salamone is a graduate of The Ohio State University with a double major in finance and insurance and risk management. He has over 25 years of options trading experience, emphasizing technical and sentiment analysis in his equity, broad market and sector research. Mr. Salamone is the author of Schaeffer's Monday Morning Outlook, and he has been interviewed on CNBC, Bloomberg Television, Fox Business Network and quoted in several national media outlets such as The Wall Street Journal, Reuters, the Associated Press and others. Todd has trained tens of thousands of traders to be successful options traders.