Marathon Oil stock has gained more than 40% in a month.
Go Nakumara/Bloomberg
Stocks that are out of favor can sometimes see short-term gains, while the opposite is true for those that have seen aggressive buying. Many stocks that Citigroup says could soon fall are in the value category, which often performs handsomely when the economy heats up.
The bank assessed the individual stocks in statistical terms, based on two factors. First is how widely held the shares are, measured by the percentage of their market capitalization held by institutional funds, and by the number of funds that hold each stock.
Second is “crowding”—the degree to which investors have bid up a stock in the past few months. The bank assessed crowding according to whether shares trade at a high multiple of earnings, among other factors.
The stocks that look most promising aren’t widely held, because funds haven’t been rushing into them, but have seen an uptick in crowding in the past month. Stocks that have high holding scores and are crowded are the most vulnerable, according to the bank.
Here are five stocks Citigroup says are promising for the short term. All have seen an uptick in crowding in the past month, but are still not too widely held.
Oil-services company Halliburton (HAL) has a holding score of 0.14—the scales are from zero to one—and a crowding score of 0.28. The crowding figure has risen by 0.12 in the past month, while the price has gained more than 25%.
Packaging Corporation of America (PKG) has a holding score of 0.13. Its crowding score has risen by 0.14 in the past month, but remains below 0.4. The stock is up just 6% in the past month.
Marathon Oil (MRO) has a holding score of 0.06 and has seen crowding rise by 0.3 to more than 0.5. The stock has soared more than 40% in the past month.
Baker Hughes (BKR) has a 0.33 holding score, while its crowding measure has increased by 0.31 in a month, bringing it to almost 1. The stock is up 10% in that time.
Emerson Electric (EMR) has a 0.32 holding score and has seen a 0.12 move up in crowding, bringing the figure to just below 1. The stock is up more than 8%.
Here are five stocks the analysis indicates are overextended.
Northrop Grumman (NOC) has a holding score of 0.64, but crowding has fallen by 0.47 in the past month. The stock is essentially flat in that time.
Boston Scientific (BSX) has a 0.98 holding score and in the past month has seen crowding fall by 0.46. Its shares have risen just under 1%.
Twitter (TWTR) has a 0.69 holding score. Crowding and the stock price have fallen by 0.21 and 1.5%, respectively, in the past month.
ConocoPhillips (COP) has a 0.67 holding score. Crowding is down 0.24 in a month, while shares have risen 30%.
Marriott International’s (MAR) holding score is 0.58. Crowding has fallen by 0.19, while the stock has risen 18%.
Some of the crowded stocks that funds are slimming down on are value-oriented and cyclical. They perform well when the economy does the same. Unsurprisingly, the Vanguard S&P 500 Value Index Fund ETF is up 12% year to date.
Beyond the near term, though, value stocks could easily be the place to be. Earnings growth for the group looks likely to be powerful even through 2022.
Write to Jacob Sonenshine at [email protected]
