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Best and Worst Stocks After Labor Day

Andrea Kramer

U.S. stock markets will be closed on Monday, Sept. 2, for Labor Day. Ahead of the unofficial end to summer, we decided to take a look at the best and worst stocks to own during the shortened holiday week, historically. One equity that could jump is retailer Under Armour Inc (NYSE:UAA), while utilities concern PPL Corp (NYSE:PPL) could be a short-term bearish target.

Below have been the 25 best S&P 500 (SPX) stocks to own during Labor Day week, looking back 10 years. Stocks had to have at least eight years' worth of returns to make the list, which was cultivated by Schaeffer's Senior Quantitative Analyst Rocky White. As you can see, UAA stock has generated one of the healthiest average returns, at 3.9%, and has ended the week higher 80% of the time.

best stocks after labor day

Under Armour stock gapped lower after earnings in late July, but seems to have found support around the $17-$18 region. This area is home to UAA's year-to-date breakeven point, and contained the stock's downside back in October. At last check, the shares were trading at $17.99 -- another 3.9% rebound next week would put them at $18.69.

A significant bounce could certainly spook a few short sellers. Short interest represents nearly 20% of the security's total available float, or about eight days of pent-up buying demand, at the retail stock's average pace of trading.

Traders expecting another post-holiday rebound for UAA should consider speculating with options. The equity's Schaeffer's Volatility Index (SVI) of 41% sits higher than just 18% of all other readings from the past year, suggesting near-term options are attractively priced at the moment.

Meanwhile, below have been the 25 worst SPX stocks to own during Labor Day week, looking back a decade. Again, stocks had to have at least eight years of returns in order to qualify. At the top of the list is PPL stock, which is one of only two equities with just a 20% positive rate for the short week. On average, PPL shares have surrendered 1.16% the week of Labor Day.

worst stocks after labor day

PPL has been in a channel of lower highs and lows since June. The stock is attempting to find a floor in the $29 area, and earlier this month fell as low as $28.55 -- near its year-to-date breakeven level.

As with UAA, PPL shares are also popular among short sellers. Short interest represents just 5% of the security's total available float, but the nearly 35 million shares sold short would take nine sessions to buy back, at the equity's average pace of trading. Of course, if PPL continues its trend of weak post-Labor Day performance, it's doubtful shorts will be spooked into scrambling.

Investors expecting more short-term downside for the equity could pick up options at a relative bargain. PPL's SVI of 19% is in the bottom third of its annual range, meaning the equity's front-month at-the-money options have priced in lower volatility expectations just 33% of the time during the past year.