The real estate sector has become a perennial underdog on Wall Street, as the economic recovery continues to sputter along. However, the price action in the iShares Dow Jones U.S. Real Estate Index Fund (IYR) is actually pretty impressive.
The exchange-traded fund (ETF) is up more than 8% year-to-date, and resting comfortably above support at its 10-week, 20-week, and 32-week moving averages. Within the group, we’ve uncovered a trio of stocks that are outperforming on the charts, yet are surrounded by skepticism on Wall Street. Here’s a closer look at sector peers Boston Properties, Inc. (BXP), Simon Property Group, Inc. (SPG), and Vornado Realty Trust (VNO).
Boston Properties (BXP)
BXP has been locked in a steady uptrend for more than two years, with the stock almost quadrupling in value since bottoming near $30 per share in March 2009. During this time frame, BXP’s ascent has been highlighted by support at its 10-week, 20-week, and 32-week moving averages. The stock has endured just two weekly closes below this trendline trio in the intervening months.
Currently, BXP boasts a healthy year-to-date gain of 25.4%. In fact, the stock has bested the broader S&P 500 Index (SPX) by more than 11 percentage points over the past 60 sessions, on a relative-strength basis.
However, pessimism is thick on this technical standout. During the past 10 days, options players on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 8.77 puts for every call on BXP. This ratio arrives in the 90th percentile of its annual range, revealing that speculators have rarely scooped up bearish bets over bullish at a faster pace.
Likewise, BXP’s Schaeffer’s put/call open interest ratio (SOIR) arrives at 1.43, in the 98th percentile of its annual range. Not only does this SOIR indicate that puts outnumber calls among options slated to expire within three months, the lofty percentile rank also reveals that short-term options players have been more pessimistically positioned just 2% of the time during the past year.
Elsewhere, short interest accounts for a healthy 7.3% of BXP’s float, or 7.9 times its average daily trading volume — representing an ample supply of sideline cash to fuel future gains. Likewise, half of the 22 analysts following BXP maintain a skeptical “hold” rating, leaving plenty of room for potential upgrades.
Traders anticipating additional upside from BXP may want to consider the stock’s October 100 call.
Simon Property Group (SPG)
SPG has also been burning up the charts during the past couple of years, with the stock now trading just a stone’s throw from its February 2007 all-time high in the $124 area. The shares have gained 38.4% over the past 52 weeks, and they’ve notched a market-beating advance of 18.1% in 2011 alone.
The most recent leg of SPG’s uptrend has been supported by its 20-day and 80-day moving averages, which have guided the stock consistently higher since mid-January. The equity’s recent pullback to the former of these trendlines creates a potential entry point for a bullish play on the shares.
However, options players aren’t buying into SPG’s technical strength. The stock’s 10-day ISE/CBOE/PHLX put/call volume ratio of 3.69 indicates that puts bought to open have nearly quadrupled calls in recent weeks. This ratio ranks higher than 74% of other such readings taken during the past year, implying a greater-than-usual appetite for bearish bets over bullish.
In the same vein, SPG’s SOIR of 1.34 stands in the 71st annual percentile, confirming that options players are more skeptical than usual toward the shares. Plus, shorted shares represent 4.4% of SPG’s float, or 7.4 times the stock’s average daily trading volume. Going forward, continued gains by SPG could prompt an unwinding of these bearish bets.
Traders hoping to capitalize on additional upside in SPG may want to consider the equity’s October 105 call.
Vornado Realty Trust (VNO)
Like its sector peers, VNO has displayed some serious technical mettle in recent years. Since August 2009, the stock has been guided higher by long-term support at its 10-month moving average. Year-to-date, VNO has collected a gain of roughly 11%.
Despite the equity’s resilience on the charts, short sellers are betting on an imminent price plunge. Short interest on VNO ramped up by 6.7% over the past month, and increased by 8.9% during the most recent reporting period. At the stock’s average pace of trading, it would take exactly one week for all of these shorted shares to be covered.
Analysts are also unimpressed, with Zacks reporting eight skeptical “hold” ratings, compared to just four “strong buys.” As VNO continues its longer-term ascent, a round of bullish notes from the brokerage group could draw more buyers to the table.
Traders looking to take part in VNO’s uptrend may want to consider the stock’s December 85 call.