Goldman Sachs analysts are advising their clients to consider buying options for the July preannouncement season to take advantage of potential stock price fluctuations during these unforeseen events. The analysis, which was released on Wednesday, suggests that investors may not fully appreciate the volatility associated with preannouncements.
The report points out historical data indicating that there have been around 600 preannouncements so far this year, with an average stock price change of approximately +/- 6.7% in the two days surrounding the announcement. Notably, 57% of these preannouncements have led to positive stock movements in the current year.
Goldman Sachs is emphasizing that sectors like Technology, Healthcare, and Consumer Discretionary tend to experience a high number of preannouncements in July. The analysts believe that investors are underestimating the volatility linked to these events, which often occur without a set schedule.
To capitalize on this expected volatility, Goldman has identified various stocks with a track record of preannouncing earnings in July. They have highlighted the Semicon West event (July 9-11) as a possible trigger for semiconductor stocks, including Applied Materials (NASDAQ) and AMD (NASDAQ).
Additionally, aside from broader industry trends, the report outlines four specific “catalyst-based idiosyncratic trades:”
Starbucks (NASDAQ): Goldman recommends buying calls before the earnings announcement on July 30th. The bank’s analysts view this as an opportunity given SBUX’s recent underperformance and anticipated growth in the upcoming quarters.
Chipotle Mexican Grill (NYSE): Goldman suggests purchasing straddles before the earnings release on July 24th. Despite short-term sentiment concerns, the analysts believe CMG has the potential for strong long-term performance.
Wells Fargo (NYSE): Goldman is advising clients to buy calls in anticipation of Wells Fargo’s earnings announcement on July 12th. The analysts foresee potential upside to WFC’s 2024 guidance attributed to loan and deposit growth as well as potential regulatory changes.
Goldman Sachs’ strategy demonstrates their belief that these upcoming events offer substantial trading opportunities for investors who are prepared to utilize options to navigate the anticipated market volatility.
Image Source: rafapress / Shutterstock
