While most of the U.S. stock market is set to wrap up the first quarter with a gain, the shares of H&R Block (HRB) have underperformed, down nearly 4% in 2019. The security has been stagnating recently beneath the formerly supportive $24.50-$25 neighborhood, now home to its descending 50-day moving average. What’s more, history suggests traders may want to short HRB shares before the April 15 tax deadline.
Specifically, HRB has been one of the worst S&P 500 Index stocks to own in the month of April. Looking at stocks with at least eight years’ worth of returns, HRB averaged the biggest April loss of all, at 4.66%, per data from Schaeffer’s Senior Quantitative Analyst Rocky White. Further, the tax stock has ended the month higher just four of the past 10 years. A similar drop from HRB’s current perch of $24.38 would place the equity around $23.24 — below recent support in the $23.60 range, and around the stock’s February lows.
Despite the security’s underperformance in 2019, 40% of analysts following HRB maintain “strong buy” opinions, with not a “sell” to be found. Should the equity once again sink in April, a round of analyst downgrades could weigh on the shares.
Traders looking to speculate on HRB’s short-term trajectory may want to consider options. The stock’s Schaeffer’s Volatility Index (SVI) of 25% is higher than just 5% of all other readings from the past year, suggesting near-term H&R Block options are pricing in relatively modest volatility expectations.
HRB’s May 25 put was last asked at $1.30. Buyers of the put would profit the deeper HRB slid beneath $23.70 (strike minus premium paid) before the options expire on Friday, May 17. Maximum risk, meanwhile, is limited to the premium paid at initiation, should the security defy seasonality headwinds and move above the strike in the option’s lifetime.