Economists at Goldman Sachs advise their clients to consider purchasing options during the July preliminary period to capitalize on possible stock price fluctuations resulting from unforeseen events. The report, released last Wednesday, suggests that investors may not fully grasp the volatility associated with these preannouncements.
Based on historical records, close to 600 preliminary announcements have been made so far this year, leading to an average stock price change of around +/- 6.7% during the two days surrounding the announcement. Interestingly, 57% of these preliminary announcements have led to positive stock movements this year.
Goldman Sachs emphasizes that industries such as Technology, Healthcare, and Consumer Discretionary frequently experience a high volume of preliminary announcements in July. The analysts believe that investors are underestimating the unpredictability linked to these occurrences, which often happen without a set schedule.
To capitalize on the expected market volatility, Goldman has identified several stocks that are known for releasing preliminary earnings reports in July. They have particularly highlighted the Semicon West event (July 9-11) as a potential trigger for semiconductor stocks like Applied Materials (NASDAQ) and AMD (NASDAQ).
Furthermore, in addition to general industry trends, the report outlines four specific “catalyst-based idiosyncratic trades:”
Starbucks (NASDAQ): Goldman recommends purchasing call options before the earnings announcement on July 30th. The analysts at the bank view this as an opportunity considering SBUX’s recent underperformance and the anticipated growth in the upcoming quarters.
Chipotle Mexican Grill (NYSE): Goldman suggests acquiring straddle options before the earnings call on July 24th. Despite concerns about short-term sentiment, analysts are bullish on CMG’s long-term growth prospects.
Wells Fargo (NYSE): Goldman advises buying call options in anticipation of the earnings release on July 12th. Analysts foresee a potential upward trend in WFC’s 2024 outlook due to growth in loans and deposits, as well as potential regulatory changes.
Goldman Sachs’ strategy demonstrates their confidence in the significant trading opportunities that these upcoming events present, for investors who are willing to utilize options to navigate the anticipated market volatility.
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