We estimate there have been 268 preannouncements year-to-date and the average stock has moved +/-6.3% on the two days around these events. This year, stocks made positive moves following these events roughly 50% of the time.
As is typical, Healthcare and Consumer Discretionary names have dominated year-to-date preannouncements.
Our analysis of 8,000+ preannouncements since 2011 reveals ~9% of all preannouncements have occurred in the month of April, with sector biases toward Healthcare, Discretionary and TMT names. Given the mostly unplanned nature of these events, we believe investors underestimate their associated volatility, and that could present option buying opportunities. In today’s note, we identify 25 stocks that have (1) preannounced at least twice in the month of April since 2011 and (2) at least once in the past 2 years.
Trade #1: Buy SMCI puts ahead of earnings (28-Apr BMO); Michael is bearish on SMCI as he sees margin headwinds from intensifying competition in AI servers and expects its premium valuation multiples to converge with peers over time.
Trade #2: Buy T calls ahead of earnings (23-Apr BMO); Jim sees T as the best positioned among peers heading into 1Q earnings on potential upside to wireless profitability and faster copper decommissioning. He believes the company’s defensive characteristics make it a compelling Buy idea in the current volatile market environment.
Trade #3: Buy DHR straddles ahead of earnings (22-Apr BMO); Matthew is constructive on DHR as he believes the bioprocessing market is poised for recovery, presenting a long-term opportunity for DHR especially given its attractive valuations. He believes investor focus remains on the uncertainty related to the timing of the bioprocessing recovery and ramp along with near-term headwinds facing its China diagnostic business.
Trade update: Between publications, we closed our recommendations to buy JEF & CTAS straddles at gains; and our recommendations to buy 1) calls on ACN expired at a loss, 2) straddles on CHWY and FDX expired at losses.
Below, we identify 25 stocks that have (1) preannounced at least twice in the month of April since 2011 and (2) have preannounced at least once in the past 2 years. This screen is not meant to imply that our analysts have a fundamental view that a preannouncement is more likely this quarter than any other quarter. We watch non-earnings events scheduled at this time of year very closely. While preannouncements are not typically planned events, a company is more likely to preannounce if there is a scheduled event that falls into a period after the close of the quarter.
