So far this year, Apple Inc. (NASDAQ:AAPL) has yet to have a significant stock price reversal of more than 30%, although it has had some smaller ones. Overall though, UBS analysts say there has been seven price reversals this year to date. They note that volatility has been largely focused on individual stocks. Among their favorite stocks right now are Apple, Stratasys, Ltd. (NASDAQ:SSYS) and EMC Corporation (NYSE:EMC).
Some years more volatile than others
In a report dated July 2, 2014, analyst Steven Milunovich and his team said they examined stock price reversal trends since 2008 and have found an average of one reversal of more than 30% per year. They note that some years saw more volatility than others. Of the years they studied, they saw more volatility in 2008 and 2011. This year so far, there have been only seven significant reversals. Fusion-IO, Inc. (NYSE:FIO) and 3D Systems Corporation (NASDAQ:DDD) each had two of those reversals. Here’s the full list (all charts and graphs courtesy UBS).
The UBS team notes that their methodology means that annual numbers are weighted to the second half of the year. For example, last year August was the big month for reversals, with 11 of the 26 total they had for the year. They note that this year so far anyway, it looks like volatility will be on the low end, although clearly this could change in the next few months.
Apple, Hewlett-Packard smoothing out after volatility
Milunovich and his team say larger cap stocks have tended to be the steadiest, although there are always exceptions. For example, Apple and Hewlett-Packard Company (NYSE:HPQ) were among the most volatile bigger names. Currently both are in upward trends that the analysts don’t believe will reverse any time soon. Here’s a look at the reversal trends for both:
The UBS team favors Apple, EMC Corporation (NYSE:EMC), Stratasys, Ltd. (NASDAQ:SSYS), and Cognizant Technology Solutions Corp (NASDAQ:CTSH). They think Cognizant is currently on a break but will move higher and note that EMC has been “trading in ranges” for the last three years. They don’t see this changing soon either.
In the wake of talk about an acquisition of Rackspace Hosting, Inc. (NYSE:RAX), they see a risk of it reversing the positive trend if no deal is made. They also note that 3D printing stocks like 3D Systems and Stratasys reversed downward trends after New Year’s but then reversed back upward more recently. They prefer 3D Systems to Stratasys.
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