Top 9 Stocks to Trade This Fall

Start Looking for the Fall’s
Best Trades

The adage “Sell in May and go away” certainly did not apply this summer. MarketWatch reports that, since 1950, the two worst months in which to
invest are August and September.

Well, so far, 2009 has proved to be an exception, as we smashed through August with one of the best performances on record. And September may very
well disprove the historical data and reward stockholders with another round of hefty gains.

So it’s time that you started looking for this fall’s best trades. That’s why we’ve compiled nine of the best trades
for you here.

NEXT – Trade #1

Trade #1 – AutoZone (AZO[1])

By Chris Johnson and Jon Lewis

Cooler weekends mean driveway mechanics will be out in droves. Though the government cleared a slew of clunkers off America’s roads, there are lots
of cars remaining that need work. With consumers still in conservation mode, that means plenty of do-it-yourselfers will need parts and supplies from
the likes of AutoZone (AZO[1]).

After doubling from its March low to April high, the stock has cooled off, which has caused many analysts to turn their backs on the shares. This
creates a low-expectation environment that we find attractive for bullish plays.

With the stock returning to the long-term support of its 200-day moving average, the fundamentals remain in place to push the stock higher. AZO
continues to occupy an attractive space in the retail world, and there’s plenty of room on the bandwagon.

Jump aboard before AZO becomes a crowded trade once again.

NEXT – Trade #2

Trade #2 – Vail Resorts (MTN[2])

By Chris Johnson and Jon Lewis

For many, the end of summer means that the beginning of ski season is just around the corner. A look at the chart of mountain resort operator Vail
Resorts (MTN[2]) shows that a positive seasonal effect begins kicking in as the slopes become covered with
snow.

In addition to some technical strength recently exhibited by the stock (up more than 35% in the past six weeks), our sentiment indicators suggest
that the “crowd” has been bearish on MTN through the slower summer months. Current short interest is huge, and just a third of the covering analysts
rate the stock a “buy.”

We expect that the upcoming ski season will shake these bears off the sidelines and turn them into buyers of MTN. Get in the stock now before the
buying pressure kicks in.

NEXT – Trade #3

Trade #3 –
Chesapeake Energy (CHK[3])

By Chris Johnson and Jon Lewis

The end of summer doesn’t just mean the beginning of football season; it also marks the beginning of the home heating season. Natural gas and oil
companies have seen a drop in prices as the crowd ran away from commodity stocks in 2009. But with furnaces due to start kicking on soon after Labor
Day, companies in position to benefit from a rise in natural gas prices should offer great winter trading opportunities.

Among the better positioned companies is Chesapeake Energy (CHK[3]), which has historically found profit
potential among a rising energy pricing and demand environment for natural gas.

Technically, the stock is up more than 40% this year and is riding along its ascending 20-week moving average. Look for this trend to continue as
demand for gas heats up after Labor Day.

NEXT – Trade #4

Trade #4 –
SPDR S&P 500 (SPY[4])

By Michael Shulman

Labor Day means everyone is heading back to school and back to work, including professional investors and traders, so we should see a rise in volume
in equity markets.

Personally, I think this will be the last leg of the rally and a prelude to a serious correction coming in late September or October. But that doesn’t
mean you can’t make money as the rally runs its course with very short-term (i.e., a one- to two-week time horizon) trades.

Take a look at short-term call options on the SPDR S&P 500 (SPY[4]). I recommend the out-of-the-money SPY
Oct 102 Calls (SWGJX), or even further out-of-the-money October calls. Be prepared to make a quick 40%-plus profit, and then run.

NEXT – Trade #5

Trade #5 – iShares FTSE/Xinhua China 25 Index (FXI[5])

By Michael Shulman

Official Chinese statistics should filed in the fiction section of libraries, the government is finally starting to put the brakes on some of the
reckless lending that spilled into equity markets, and China ain’t the engine of growth people think it is — in short, it’s a train wreck waiting
to happen.

So, short China by buying put options on the iShares FTSE/Xinhua China 25 Index (FXI[5]), which does
not represent domestic Chinese equity markets, per se, but it’s close enough.

Look at out-of-the-money October FXI puts, and shoot for a 40%-plus gain. Warning: These puts are not very liquid, spreads can be disconcerting,
and you should only use limit orders.

NEXT – Trade #6

Trade #6 –
PowerShares DB US Dollar Index Bullish Fund (UUP[6])

By Michael Shulman

Even though interest rates are falling, the U.S. dollar is rising — not a good sign over time for the economy over time — but you can
play the dollar on the long side with the PowerShares DB US Dollar Index Bullish Fund (UUP[6]).

Even better, buy call options on this dollar ETF, specifically out-of-the-money October UUP calls. However, UUP calls do not trade a great deal,
so liquidity may be a problem. Be prepared for bid spreads, and use limit orders.

NEXT – Trade #7

Trade #7 – Office Depot (ODP[7])

By Nick Atkeson and Andrew Houghton

Office Depot (ODP[7]) fell from well over $40 per share to a low of 59 cents during the 2008
bear market. Today, it is around $5 per share, and institutional option investors believe the stock is still too cheap.

On July 27 and 28, in the wake of the company missing earnings and with the stock trading around $4.50, these investors bought roughly 45,000 Jan
5 Calls (ODPAA) and sold roughly 45,000 Jan 5 Puts (ODPMA). This “risk-reversal” trade shows a tremendous amount of conviction that the stock will
be above $5 per share in January.

If you believe the corporate world will continue to improve from Labor Day through the end of 2009, ODP appears to have set a downside limit price
of $5 combined with uncapped upside potential. With the stock currently trading at about $5, ODP is offering a profit ticket in a better economy.

NEXT – Trade #8

Trade #8 – Microsoft (MSFT[8])

By Nick Atkeson and Andrew Houghton

Back-to-school and Windows 7 are two huge drivers for Microsoft (MSFT[8]) heading into the rest of
the year. With the summer coming to an end, we are all headed back to work. For most of us, Microsoft is our primary work tool, and many of us will
want the latest and greatest. For corporations that are currently running on Vista, Windows 7 can’t come fast enough.

We saw evidence of Microsoft’s strength during the last week of August, as Dell (DELL[9]) reported
better-than-expected earnings and talked about some seasonal improvement going forward (80% of Dell’s customers are corporate accounts), and Intel (INTC[10])
raised revenue guidance during its mid-quarter update.

Earnings estimates for MSFT for this year and next are $1.70 and $1.93, respectively. The stock is currently trading at 12.7 times the 2010 earnings
estimate, which is likely too conservative. If there is one back-to-school purchase you should make, it is MSFT.

NEXT – Trade #9

Trade #9 –
International Paper (IP[11])

By Nick Atkeson and Andrew Houghton

Global production in the pulp, paper and publishing sector is expected to increase by 77% from 1995 to 2020, which is great news for International
Paper (IP[11]). Back-to-school shopping and an improving economy are key drivers of paper consumption currently.

With revenues up, IP’s management is rapidly cutting its debt burden from a high of $12.7 billion to roughly $9.5 billion by year-end 2009. On July
30, the company reported Q2 earnings per share of 20 cents versus the consensus estimate of 0 cents.

IP and most of the stocks in the paper and paper products group are flying higher. It looks like the sky is the limit. For the stock to return to
its historical value over the past five years it should double from its current level.

Related Articles:

• Top 5 Stocks for September[13]
• Six Off-the-Chart Bullish Plays[14]
• Top Stocks to Avoid for the Rest of the Year[15]
• Our Top Stocks, Options and Income Plays[16]
• 5 Red-Hot China Stocks[17]