Schaeffer's Investment Shares 4 Stock Picks as Company Celebrates 40 Years in Stock and Options Trading

They say life begins at 40 and after 4 decades of successfully providing accessible, professional-grade trading information to retail traders, Schaeffer’s Investment Research has every reason to celebrate.

Schaeffer’s is, in fact, the go-to place for stock and options trading recommendations, options education and market commentary. Schaeffer’s Investment Research was built from scratch on Founder and CEO Bernie Schaeffer’s vision, which remains its mission 40 years later.

Founded in 1981 and headquartered in Cincinnati, Ohio, Schaeffer’s Investment Research prides itself as the world’s longest-running options trade-alert provider.

During the company’s humble beginnings, Schaeffer had a major decision to make. He wondered whether he should offer stock trading picks in addition to options trading picks (the safe route) or whether he should stay the path, going all-in with an options-centric focus (the risky route).

Photo: Bernie Schaeffer, founder and CEO of Schaeffer’s Investment Research

Although options were just taking off and stocks had been around for a while, Schaeffer made the bold decision to be the best options trading publisher in the world and to focus exclusively on identifying and timing options trades for his customers. The company’s success started unfolding from there.

Options are incredibly attractive to traders with this high-risk and high-reward mentality. Profits are literally uncapped, while the downside risk is limited to the initial investment. Options play with the power of convexity, creating an unlimited upside potential in every option buy.

“There’s a disconnect between what people are doing and the reason for buying stock in the first place,” Schaeffer said in a press release. “Why are you risking your money if you’re not expecting, potentially, some very attractive appreciation down the road?”

Schaeffer’s Investment Research is 100% options because options offer 100% more opportunity than just trading stocks. Every year, more and more traders are realizing the crazy growth rate for options trading.

With that said, check out Schaeffer’s Investment Research’s 4 stock picks as the company celebrates 40 years in stock and options trading.

Logitech International (NASDAQ: LOGI)

Logitech International S.A., commonly abbreviated to Logi, is a Swiss manufacturer of computer accessories and software. The firm, headquartered in Lausanne, Switzerland, is one of the world’s major producers of input and interface devices for personal computers (PCs) and other digital goods. It operates in Europe, Asia, Oceania and the Americas.

Shares of the computer hardware giant have been outperforming on a large scale, up 90% over the past 12 months. A slew of support has been in place to aid this climb, most notably at the 40-day moving average, round-number $20 billion market-cap level and the $117 to $118 mark.

Switching gears toward brokerage coverage, there looks to be plenty of room for upgrades judging from the 50% of analysts who sport a tepid “hold” recommendation on the equity.

Meanwhile, LOGI looks ripe for a short squeeze. In fact, over the past 2 reporting periods, short interest dropped 6.3% but still accounts for 8% of the stock’s total available float. At the security’s average pace of daily trading, it would take short sellers more than 3 weeks to buy back these bearish bets.

A shift of sentiment in the options pits could act as a tailwind as well. Specifically, Logitech International stock’s 50-day put/call volume ratio of 1.57 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX) stands in the 85th percentile of its annual range. In simpler terms, puts are being purchased over calls at a much faster-than-usual pace of late.

Penn National Gaming (NASDAQ: PENN)

Penn National Gaming Inc. owns, operates or has ownership interests in 42 gaming and racing properties in 20 states as well as video gaming terminal operations, focusing on slot machine entertainment.

The company offers live sports betting at its properties in Colorado, Illinois, Indiana, Iowa, Michigan, Mississippi, Pennsylvania and West Virginia. Penn National Gaming’s strategy has continued to evolve from an owner and manager of gaming and racing properties into an omnichannel retail and online gaming provider, live racing and sports betting entertainment.

National Gaming may be up nearly 100% year-over-year, but it has carved out a steady downtrend since March. The shares now sit around $70, which represents half the stock’s all-time highs and was a key inflection point back in fall 2020. As PENN’s 14-day relative strength index (RSI) drifts below 28 and into “oversold” territory, a look back at similar readings in the past shows good buying opportunities.

Penn National has expanded rapidly into new areas with its Barstool Sportsbook. And consider for a moment that Florida, Arizona and Connecticut recently approved sports betting. This trend is likely to continue as more states pass gambling legislation, putting PENN in pole position to capitalize on such macro tailwinds.

Many analysts remain on the sidelines, and a shift toward upgrades and/or price-target hikes could provide tailwinds for the equity. Of the 13 brokerages covering PENN, 6 maintain “hold” or “strong sell” ratings.

There is also room for a potential short squeeze. Short interest tapered off in the most recent reporting period, yet the 13.25 million shares sold short accounts for nearly 9% of PENN’s total available float.

Sonos (NASDAQ: SONO)

Sonos is one of the world’s leading audio products manufacturers. Founded in 2002 by John MacFarlane, Craig Shelburne, Tom Cullen and Trung Mai, the American manufacturer is best known for its multiroom audio products.

Sonos has over the years partnered with more than 100 companies that offer music services, including Pandora, iHeartRadio, Spotify, MOG, QQ Music and Amazon Music.

The company found recent support at its Feb. 11 bull gap level. There’s additional technical support in place at the shares’ 160-day moving average as well as the over 50% year-to-date level. SONO broke out above a trendline connecting lower highs since its April peak and has been recently retesting this breakout zone, which held above its previous post-earnings back in May. While the tech sector has churned for most of 2021, a small-cap stock like SONO could benefit from the more recent rotation back into tech names.

For a stock up nearly 42% in 2021, it’s noteworthy that 3 of the 7 analysts in coverage maintain tepid “hold” ratings. This indicates there’s ample room aboard the bullish bandwagon.

Meanwhile, short interest is near record-high levels, and the bulk of the short activity has occurred between $23 and $30. With short interest declining by 10% in the most recent reporting period but a healthy 5.8% of SONO’s total available float still sold short, there’s decent potential for a short squeeze going forward. Options traders have also taken a bearish stance.

At the ISE/CBOE/PHLX, SONO sports a 50-day put/call volume ratio that stands higher than 98% of all readings from the past year. An unwinding of these bearish bets could fuel more upside for the equity.

Southern Copper Corp. (NYSE: SCCO)

Southern Copper, founded in 1952 in Delaware, is a world-class mining metallurgical company, producer of copper and valuable byproducts.

The company’s mission is to extract mineral resources, transform and commercialize them, satisfy market requirements, fulfill social and environmental responsibility and maximize the creation of value for its shareholders.

The mining and metals name has been moving within a series of lower highs, coupled with a break in its recent short-term downtrend. The shares look to have found support near the $50 billion market-cap level and over 50% year-over-year mark, with an added fluctuation at the year-to-date break-even level.

In terms of analyst attention, there looks to be ample room for bull notes moving forward. This is per the 5 of 6 covering brokerage firms that sport a “hold” or “strong sell” rating on the security.

Meanwhile, in the options pits, bears have been circling, leaving plenty of room for bulls to enter the ring. Specifically, SCCO sports a 10-day put/call volume ratio of 2.03 at the ISE/CBOE/PHLX SONO, which stands in the lofty 96th annual percentile. Echoing this put-skewed trading is the security’s front-month gamma-weighted Schaeffer’s put/call open interest ratio (SOIR), which sits at a top-heavy 2.59.

This means that near-the-money puts outweigh calls among options expiring in the standard August series. What’s more, spikes in the front-month gamma-weighted SOIR have typically predated pops in the price, which could dislodge the stock out of its current downtrend.

Short interest looks to have rolled over after a climb of 44% between May and June. In fact, short interest dropped 13.5% during the past 2 reporting periods and still accounts for 6.4% of the equity’s float. At Southern Copper stock’s average pace of daily trading, it would take shorts nearly 4 days to buy back their bearish bets.

Lastly, the equity’s Schaeffer’s Volatility Scorecard (SVS) sits at 70 out of 100. This suggests the stock has exceeded these volatility expectations during the past year — a boon for premium buyers.

Read more about Schaeffer’s Investment Research here.

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Harry Byrne

Harry Byrne

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