Welcome to the "New Normal": S&P 500 Stocks With Bearish Options Sentiment Data

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<em>(List compiled by Andrew Dominguez. Data sourced from Finviz and Schaeffer’s.)

Two years ago, Bill Gross (pictured) and Mohamed El-Erian, the top dogs at PIMCO, coined the term “The New Normal” in order to describe what they expect to be a decade of middling economic growth, relatively high unemployment, and meager stock market returns.

A contemporaneous report by Arijit Dutta of Morningstar makes clear that few people at the time wanted to accept such a dismal forecast.

“[Mr. Gross’] ideas carry a lot of weight indeed, which doesn't make it any easier for most people wedded to the notion of a secular bull market interrupted by periodic setbacks (whom Gross called "children of the bull market") to digest this sketch of a new, lesser-return normal,” wrote Dutta in 2009.

Mr. Gross’ outlook has been much derided in the years since he first touted it. Former White House economic adviser Lawrence Summer, former chairman of the US Council of Economic advisers Christina Romer, and widely published investment analyst Kenneth Fisher are among the government technocrats and private sector pundits that have voiced their opposition, according to Sree Vidya Bhaktavatsalam of Bloomberg.

Fast-forward to 2011, and fiscal and political imbroglios in Europe and the US are heavily weighing down markets, just as Mr. Gross predicted. The most recent Federal Reserve press release forecasts sluggish economic activity “at least through mid-2013”.

“A lot of the new normal characteristics have played out… Some people confused new normal with fatalism, but the intention was the opposite. There was the hope that policy makers would recognize that there are structural responses they needed to embark on,” Mr. El-Erian told Bloomberg in an interview.

Do you accept the idea of a “New Normal”? Or do you believe the US will rebound into a new period of solid growth?

Just in case you find yourself on the pessimistic side of the fence, here is a list of S&P 500 stocks that options traders believe have significant downsides. Do you agree with their outlook?

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1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

List sorted by percent increase in put/call ratio. (Note: An increase in a Put/Call ratio means there is a rising number of put contracts relative to call contracts, i.e. bearish options market sentiment)

1. CareFusion Corporation (CFN): CATV Systems industry with a market cap of $4.9B. Put/call ratio has increased 410.00% over the last ten trading days (from 0.30 to 1.53).

2. Cablevision Systems Corporation (CVC): Medical Instruments & Supplies industry with a market cap of $5.47B. Put/call ratio has increased 762.50% over the last ten trading days (from 0.32 to 2.76).

3. Safeway Inc. (SWY): Grocery Stores industry with a market cap of $6.41B. Put/call ratio has increased 213.79% over the last ten trading days (from 0.58 to 1.82).

4. Covidien plc (COV): Medical Instruments & Supplies industry with a market cap of $23.22B. Put/call ratio has increased 191.11% over the last ten trading days (from 0.45 to 1.31).

5. Campbell Soup Co. (CPB): Processed & Packaged Goods industry with a market cap of $9.86B. Put/call ratio has increased 134.62% over the last ten trading days (from 0.52 to 1.22).

6. CarMax Inc. (KMX): Auto Dealerships industry with a market cap of $6.18B. Put/call ratio has increased 107.28% over the last ten trading days (from 1.51 to 3.13).

7. Precision Castparts Corp. (PCP): Metal Fabrication industry with a market cap of $21.01B. Put/call ratio has increased 105.41% over the last ten trading days (from 0.74 to 1.52).

8. Principal Financial Group Inc. (PFG): Asset Management industry with a market cap of $7.58B. Put/call ratio has increased 92.42% over the last ten trading days (from 0.66 to 1.27).

9. El Paso Corp. (EP): Specialized Semiconductor industry with a market cap of $6.12B. Put/call ratio has increased 77.91% over the last ten trading days (from 0.86 to 1.53).

10. Linear Technology Corp. (LLTC): Oil & Gas Pipelines industry with a market cap of $14.03B. Put/call ratio has increased 84.21% over the last ten trading days (from 0.57 to 1.05).



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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