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Top 6 Stocks for October

Solid fundamentals make these technical picks even more attractive

By Sam Collins, InvestorPlace Chief Technical Analyst

Earnings, Dividends Make These Stocks Stand Out

Following a Dow Theory bear market signal, a death cross and other technical characteristics plunged the key indices to new lows in August, and those lows were tested again in September. The Dow has been down for seven of the past nine weeks, and the charts of the major indices all show bearish flag formations.

Because of the high volatility of the markets, the following stock picks have been chosen for their consistent earnings and steady dividends. Technically every stock on the list is still in an uptrend despite the miserable market conditions. Thus, if the overall market improves, these stocks should outperform most others by a wide margin.

Here are your top stocks to buy for October:

Top Stock to Buy #1 – American Electric Power

American Electric Power (NYSE:AEP), a holding company for a number of electric utilities mainly in the central and southern United States, is known for its consistent earnings and dividend policy. In October, it declared a 9.5% increase in its dividend, which is now $1.84, providing a yield of 5%. S&P has a “five-star strong buy” on the stock.

Technically AEP broke from a long-term bearish resistance line in April and has been consolidating between $36 and $39 — except for one selling climax in August that drove it down to $33.50. Note the recent increase in accumulation. A break from the current bullish “W” formation has a target of $44.

 AEP Top 6 Stocks for October

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Top Stock to Buy #2 – Celgene Corp.

Celgene Corp. (NASDAQ:CELG) is considered by S&P to have “the brightest growth prospects among large-cap biotech companies.” Its impressive performance was led by its cancer products Revlimid and Vidaza. The company also has a number of other products in the pipeline awaiting FDA approval.

Earnings are expected to reach $3.20 in 2011 and $3.80 in 2012, and gross margins are expected to maintain 93%. Analysts target the stock at $75 to $85 within 12 months.

Technically CELG broke from a compound top on Sept. 20 on heavy volume, and even though the stochastic appears overbought, the breakout is so strong that it could remain overbought for some time. The trading target for CELG is $70.


CELG Top 6 Stocks for October

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Top Stock to Buy #3 – Dollar General

Dollar General (NYSE:DG), a leading U.S. discount retailer, has defensive qualities that should help it hold up in a weak economy. With low operating margins and a strong cash flow, earnings are expected to top $2.30 in 2012, up from $1.82 in 2011.


Note the recent breakout from a triangle, and the sudden turn up by the stochastic. The trading target is $44. Buy at market.

DG Top 6 Stocks for October

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Top Stock to Buy #4 – General Mills

Blue-chip producer of packaged consumer food products General Mills (NYSE:GIS) has experienced steady earnings and dividend increases for many years, making it one of the premier institutional favorites. The stock pays a dividend of 3%. It has paid dividends without reduction or interruption for 113 years.

Technically GIS is in a major bull channel and recently experienced very heavy accumulation. The stock’s long-term fundamental and technical target is $44, but along with its dividend, it provides a good return for long-term investors and is a solid performer in uncertain times.


GIS Top 6 Stocks for October

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Top Stock to Buy #5 – Sturm, Ruger & Co.

Sturm, Ruger & Co. (NYSE:RGR), a manufacturer of firearms to domestic customers, has been able to avoid market slumps, and since June has appreciated by 50%.

RGR is a Zacks #1 “strong buy,” and they look for earnings of $1.65 this year, up from $1.45. In 2012, it is expected to earn $1.95. The company has topped earnings estimates for 10 of the last 11 quarters and pays a dividend of 2%.

Technically RGR is advancing with support on its 50-day moving average. The stochastic recently flashed a strong buy. The trading target for RGR is $36.


RGR Top 6 Stocks for October

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Top Stock to Buy #6 – VF Corp.

Apparel company VF Corp. (NYSE:VFC) designs and manufactures a variety of apparel and footwear for all ages. It is transforming the denim and daypack area with lifestyle apparel brands, according to Standard & Poor’s. Their Vans and North Face brands are viewed as growth drivers along with new store growth in Asia.

On Sept. 23, Bank of America Merrill Lynch upgraded VFC to a buy rating citing momentum in the retailer’s higher-margin segments led by North Face and Vans. Its acquisition of Timberland was also cited as a growth producer.

Technically VFC is in a powerful bull channel. Even though the stochastic is “overbought,” strong momentum can keep it overbought indefinitely. The target for VFC is $145.


VFC Top 6 Stocks for October

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