While many retail investors are keen to discover which securities the big market players are snapping up, sometimes it’s more telling to zero in on the stocks institutional traders are selling. Why? Because trading, for all its analytics, can be an emotional rollercoaster. And the line between triumph and disaster? Discipline.
True discipline empowers the shrewdest of investors to pinpoint when once-celebrated stocks have reached their twilight. And while the broader market may be a little late to the party, it eventually wakes up to the reality of the most hated stocks. The real trick, however, is to sidestep the decline rather than getting mowed down by it.
Here’s our game plan: We’re going to turn to the numbers, giving particular attention to the actions and sentiments of influential entities. Our first port of call will be the stocks institutional traders are parting ways with or actively betting against in the options arena. Then, we’ll juxtapose this with analyst ratings to discern any alignment in this bearish outlook. A word to the wise: always do your own due diligence. Yet, being privy to the list of the most hated stocks might just shield you against heartbreak.
This year, the journey of Peloton (NASDAQ:PTON) has been anything but smooth sailing. If the product defect debacle involving its exercise bikes wasn’t enough — causing injuries from lacerations and leading to an inevitable recall — an insider’s substantial sell-off of PTON stock added salt to the wound.
The consensus among big players seems pretty unanimous, with Peloton being identified as one of the stocks institutional traders are selling. A lot of this skepticism stems from significant activity in the options market. A striking trade involved the sale of $5 calls expiring in December 2023, a bold move given the stock’s recent $4.80 close.
Analyst sentiment, though leaning towards a hold stance, suggests a potential 67% upside with a target price of $8. Yet with an 11% loss in just a week and a staggering 32% dip in a month, it’s hard not to consider PTON as one of the most hated stocks right now.
Toast (NYSE:TOST), a provider of restaurant management software, stirred up quite a controversy earlier in the year. It introduced a 99-cent processing fee for online orders above $10, intending to fund software upgrades. But this move was met with strong consumer resistance.
Though management retraced their steps, the aftereffects lingered. The company’s stock, which saw a temporary uptick, has since been on a downward trajectory. It hasn’t escaped the watchful eyes of the big players, marking TOST as another example of stocks institutional traders are selling.
Recent notable activity was the acquisition of $20 puts expiring in October 2023. Also, throughout next year and into early 2025, major traders are placing negatively aligned derivative transactions. With TOST’s last recorded close at $20.33, the bearish sentiment is palpable. While analysts are somewhat split — the consensus signaling a moderate buy with a 35% implied upside — the 40% hold sentiment indicates an undercurrent of dwindling confidence.
Ionis Pharmaceuticals (IONS)
When delving into the realm of biotechnology, Ionis Pharmaceuticals (NASDAQ:IONS) certainly stands out. This firm has been at the forefront of discovering and developing RNA-targeted therapeutics. While its scientific contributions are noteworthy, IONS has also been a steady financial performer. It’s posted a gain of over 14% since the start of the year. Despite such robustness, why is it on the radar as one of the most hated stocks?
Peeling back the layers, it appears Ionis might be where major traders are thinking several steps ahead of the retail crowd. Fintel’s data indicates a telling move: a significant block trade involving the selling of calls on Sept. 13, which have already expired.
But the lingering sentiment is captured by another trade: the selling of $45 calls set to expire on April 19, 2024. With IONS currently hovering just under $43 and a visible ceiling around $44, it raises eyebrows. Are institutional traders betting against a rise?
On the analyst front, IONS is pegged as a moderate buy, with a promising $55.43 price target, indicating a potential 29% upside. But a recent hold rating also points to a potential 2% dip. This creates a compelling divergence of opinions to mull over.
T-Mobile (NASDAQ:TMUS), the well-regarded wireless network operator, recently grabbed headlines for some not-so-upbeat news. Announcing job cuts late last month, TMUS added itself to the growing list of companies trimming sails amidst uncertain economic times.
While layoffs typically dampen investor spirits, TMUS stock seemed to defy gravity post-announcement, possibly due to the perceived benefits of cost-cutting measures. But a deeper dive reveals an emerging sentiment: TMUS seems to be attracting bearish bets, cementing its position as one of the stocks institutional traders are selling.
Fintel’s options flow screener offers a fascinating insight. A standout is the notable premium paid for bearish bets. A recent move saw a trader acquire 1,400 contracts of the $210 put set to expire on Nov. 17, 2023, with a hefty $10.68 million premium attached. While bullish moves also saw significant outlays, the pessimistic shift is undeniable and hard to ignore.
Adding to the mix, analysts offer a unanimous strong buy rating for TMUS. So, here lies the dilemma for potential investors: side with institutional caution or back the bullish stance of the analysts? It’s a decision that requires a judicious approach.
PDD Holdings (PDD)
A notable name in the realm of online retail, Pinduoduo, better known as PDD Holdings (NASDAQ:PDD), hails from China, a market bustling with intriguing discounted opportunities. Riding on this wave, PDD has posted a commendable gain, having surged over 16% since the onset of the year.
Yet a closer inspection reveals it’s catching the wary eyes of big traders, cementing its place among the stocks institutional traders are selling. The options market is bustling, with both bullish and bearish sentiments in full swing.
But here’s what’s captivating: a glaring shift towards pessimism. A transaction from Sept. 11 stands out – a trader pocketed a hefty $1.535 million premium from the sale of 840 contracts of the $85 call, set to expire in January 2024. With PDD currently hovering around $98.35, it’s a bet suggesting a dip in its value. If PDD maintains its high, the call writers may find themselves in a costly bind.
Despite the institutional skepticism, analysts remain optimistic, bestowing PDD with a strong buy rating. This contrast poses a captivating conundrum for discerning investors.
Goldman Sachs (GS)
In the sprawling landscape of global finance, few names resonate as powerfully as Goldman Sachs (NYSE:GS). So, it’s admittedly peculiar to spot it amidst stocks institutional traders are selling. Granted, GS has seen a dip this year. But the decline is just over 1% – hardly a cause for alarm. Many might shrug it off as a flat trading phase, not entirely out of the ordinary.
Yet, a dive into the derivatives market suggests a cooler sentiment towards GS. The trading frenzy features a palpable bearish undertone. A case in point: a trader shelling out a whopping $9.73 million premium this month for the $410 put due for January 2024.
And this isn’t an isolated sentiment. Just a week prior, another trader echoed this pessimism, paying a $4.61 million premium for the same put. Such moves indicate that among the Wall Street elite, GS may be losing its charm.
In the analysts’ corner, though, GS secures a moderate buy rating. But here’s the catch: nearly a third of those ratings lean towards a hold, hinting at a tempered confidence.
Eli Lilly (LLY)
A towering presence in the pharmaceutical landscape, Eli Lilly (NYSE:LLY) typically wouldn’t raise eyebrows as a potential stock on the sell list of institutional traders. Its importance is underscored by a spectacular run this year, amassing nearly 58% in equity value. Yet, despite this stellar climb, the big players in the market seem to be hedging their bets, anticipating a potential deceleration.
A quick dive into the derivatives market paints a mixed picture, with both bullish and bearish trades actively being made. However, what’s particularly noteworthy is the overarching pessimistic tone in some of the sizable transactions.
Here’s a case in point: a trader pocketing a cool $5.845 million premium from selling 700 contracts of the $570 call slated for expiration in December 2025. Broadly, when you sift through the major options trades linked to institutions, a bearish sentiment emerges, dominated by sold calls and bought puts.
On the analysts’ front, the outlook remains largely upbeat, with a prevalent strong buy consensus. Yet, there’s a caveat. The average price target hovers around $587.71. Considering LLY’s robust journey so far, this target suggests a somewhat modest upside of just over 2%. Investors might want to read between the lines here. With such tepid potential, could it be an opportune moment to rethink one’s position?
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.