If the market has another July like it did last year, finding stocks to buy for outperformance is going to really, really hard. Heck, the S&P 500 closed out July 2013 with a total return of nearly 5%.
No, we’re not likely to see a repeat of that torrid performance, but this still is a seasonally solid time for the market. From 1928 to 2014, the S&P 500 generated an average monthly price gain of 1.6%, according to updated data from Yardeni Research.
Finding stocks to buy for tactical outperformance is always challenging, but between last year’s great run and the historical monthly benchmark, well … the bar for July is pretty high.
If you have any hope of beating the market this month, you need to find stocks to buy with both strong technicals and superior seasonality. Price momentum and a long history of strong average monthly returns tilt the odds in your favor that these stocks to buy will lead the market higher.
After screening the S&P 500 for stocks showing everything from price strength to positive seasonality, we found a number of equities with compelling technicals. Based on these strengths, here are five stocks to buy for July:
Stocks to Buy for July – American Tower (AMT)
Click to Enlarge American Tower (AMT) — the real estate investment trust (REIT) known for never standing still — bought another $1 billion in wireless communications towers in Brazil last month, and the market loves the aggressive growth strategy.
On July 1, AMT stock closed just 1% below its 52-week high and 32% above its 52-week low. That has American Tower shares trading 1.9% above their 50-day moving average, and 9.7% above their 200-day MA.
The upside price momentum extends to AMT’s relative strength indicator, which last stood at 59. That suggests healthy demand for shares, without being overbought.
Seasonality also bodes well for AMT stock in July and beyond. Based on 10 years of data tracked by Thomson Reuters Stock Reports, AMT returns an average of 2.3% in July.
Stocks to Buy for July – Norfolk Southern (NSC)
Click to Enlarge Railroad operator Norfolk Southern (NSC) is chugging into the second half of the year with a head of technical strength. Shares are already up 11% for the year-to-date, but the big gains have yet to come.
NSC stock closed the July session sitting just 2% below its 52-week high — and 43% above its 52-week low. That has NSC shares trading 3.7% above their 50-day moving average and 12% above their 200-day MA.
With a relative strength indicator of 57, NSC stock has plenty of price momentum behind it. Indeed, it has climbed into overbought territory three times since May and always enjoyed fresh demand after brief and shallow cooling-off periods.
Lastly, NSC stock is entering an outstanding period for seasonality. Over the last decade, NSC stock generated an average monthly return of 4.8%, according to Thomson Reuters Stock Reports.
Stocks to Buy for July – Dr Pepper Snapple (DPS)
As of July 1, DPS stock was a just a couple of percentage points shy of taking out its 52-week high. DPS stock is also a buoyant 37% above its 52-week low.
That has DPS stock sitting a solid 3% above its 50-day moving average and 16% above its 200-day moving average. Indeed, Dr Pepper’s technicals make shares look like they’re full of fizzy lifting drink.
The upside price momentum can also be seen in the DPS stock relative strength indicator, which, at 57, shows heavy buying interest without being overbought.
Perhaps best of all, DPS stock is set to enter a three-month period of historically strong seasonality. Over the last decade, DPS stock returned an average of 1.2% in July, 3.4% in August and 2% in September, according to Thomson Reuters data.
Stocks to Buy for July – Hewlett-Packard (HPQ)
Click to Enlarge Once a bad joke, tech company Hewlett-Packard (HPQ) has worked out enough bugs to be having a tremendous year. HPQ stock is up 22% for the year-to-date and the technicals say July will bring even more gains.
HPQ stock closed the July 1 session within 3 percentage points of its 52-week high — and a whopping 69% above its 52-week low. That put HPQ stock a good 3% above its 50-day moving average and 17% above its 200-day moving average.
The run also has HPQ stock flashing a bullish relative strength indicator of 54. All signs point to solid upside price momentum.
That could help HPQ stock raise its July batting average. Over the last 10 years, HPQ stock has returned 1.5% in July, but the charts suggest it could top that this month.
Stocks to Buy for July – Simon Property Group (SPG)
SPG stock closed just 2% below its 52-week high on July 1, a level that left it a solid 25% above its 52-week low. Recent trading shows SPG stock comfortably finds support at its 50-day moving average (it’s currently trading 1.2% above that key level). SPG stock is also 10% above its 200-day MA.
With a relative strength indicator of 58, don’t be surprised if SPG stock takes out that 52-week high soon — and then keeps going. Between price momentum and seasonality, SPG stock is set for an excellent month.
Indeed, over the last decade, SPG stocks puts up an average return of 3.2% in July, according to data from Thomson Reuters Stock Reports. August and September are terrific, as well, with gains of 1.7% and 1.9%, respectively.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.