"Stocks like Anthem Health (ANTM - Get Report), Cigna (CI - Get Report), Aetna (AET), Centene (CNC - Get Report), Community Health (CYH - Get Report) and Health Net (HNT) have had bullish Power Gauge ratings for over a year," said Chaikin, referring to his quantitative stock-picking model. "Suddenly, the acquirers are seeing the value that the model was looking at, because the factors underlying the model were very bullish."
The Power Gauge Rating system is the centerpiece of Chaikin Analytics, and attempts to indicate where a stock is headed over the next three to six months. It uses a 20-factor model based on financial metrics, earnings performance, price/volume activity and expert opinions. Chaikin previously developed the Chaikin Oscillator and Chaikin Persistency of Money Flow, which are widely used on Wall Street today.
The Power Gauge analyzes masses of financial data and distills it into stock ratings, green for bullish and red for bearish. On the bearish side, Chaikin said a number of internet and e-commerce names are flashing red.
"Stocks like Baidu (BIDU - Get Report) in China, Yahoo! (YHOO), Yelp (YELP - Get Report), Zillow (Z - Get Report), LinkedIn (LNKD) and Twitter (TWTR - Get Report) all have bearish Power Gauge ratings, and there is a good reason for it," said Chaikin. "The financial metrics, which is what a Warren Buffett would look at, comprise 35% of our model. Things like free cash flow, price-to-sales, price-to-book and return on equity are all relatively expensive for these stocks. They are not making any money at all, or sell at high price-to-sales ratios."
Chaikin added that the casino stocks including Wynn (WYNN - Get Report) have also had bearish ratings in his quantitative model "forever." Meanwhile, he said drillers in the energy sector have been identified as bearish, but refiners have been flashing green because the lower price of crude is positive for the group.
"Stocks like Tesoro (TSO), Valero (VLO - Get Report), Phillips 66 (PSX - Get Report) and Marathon (MPC - Get Report) all have bullish ratings," said Chaikin. "So if someone wants exposure to energy, those are the stocks to be looking at."