SPG is a notable underperformer this month, based on seasonality
All eyes have been on the Federal Reserve this past week as investors continue to digest Wednesday’s interest rate hike of 50 basis points -- the largest of such lift since 2000. Ahead of the hike, however, mortgage rates have been surging to unprecedented levels, averaging 5.27% for the 30-year fixed-rate mortgage ending Thursday, May 5. This peak represents a nearly 13-year high for the 30-year mortgage rate -- indicating prices to buy homes have subsequently increased substantially.
Real estate investment trust (REIT) Simon Property Group (SPG) has been a stark underperformer since late 2021, plunging nearly 30% since touching its late-November peak near $171. SPG looked to be on the road to recovery in mid-December through early January, but quickly dropped off and into a steep downtrend. Adding to the months of overhead pressure has been both the 20-day and 50-day moving averages, both of which have captured multiple breakout attempts so far in 2022. This continued resistance sent the equity to a bottom near $115, a historic pullback for the shares.
SPG also just appeared on Schaeffer's Senior Quantitative Analyst Rocky White's list of worst performing equities for the month of May, going back 10 years. In fact, SPG is the third worst REIT to own, just trailing Vornado Realty Trust (VNO), as it's averaged a 3% drop during the month, with 70% of these monthly returns negative. A similar move from its current perch would put Simon Property stock back near the $118 region, not far off the aforementioned $115 floor.
The options pits are echoing the contrarian sentiment that we follow at Schaeffer’s, with bulls ruling the roost. In fact, at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 1.93 sits higher than 88% of readings from the last 12 months. This means calls have been picked up at a much quicker-than-usual pace over the last 10 weeks.
What’s more, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.86 now stands in the 22nd percentile of annual readings. In simpler terms, short-term options traders have also rarely been more call-biased.
Analyst coverage also looks overdue for downgrades. Heading into Friday’s trading, nine of the 12 following brokerage firms boast "buy" or "strong buy" recommendations.
Subscribers to Chart of the Week received this commentary on Sunday, May 8.