April is supposed to be the cruelest month, but historically it tends to be good for investors — especially if they know which stocks to buy for outperformance.
Since 1928, the S&P 500 has delivered an average price gain of 1.3% in April, making it the third-best month for market performance. That’s good news for the passive crowd, and even better for tactical investors and traders if they can find the stocks set to outperform.
As always, these are the stocks to buy for outsized short-term gains.
Happily, technical analysis helps narrow down the S&P 500 to a handful of stocks that are most likely to beat the benchmark this month. In most cases, these stocks to buy have very recently described golden crosses — a buy signal that can become a self-fulfilling prophecy.
Additionally, stocks to buy should have seasonality at their backs — that is, a long history of doing well at this time of year. After scouring the S&P 500 for stocks to buy that have technical strength and favorable seasonality, we found these five names:
S&P 500 Stocks to Buy: Apple Inc. (AAPL)
Take strong seasonality, pristine technicals and the Apple Watch going on sale later this month, and AAPL is set to outperform once again.
April is usually very kind to AAPL as it is. Over the last decade, AAPL has enjoyed an average price gain of 6.9%, according to data from Thomson Reuters Stock Reports. But with AAPL making one of its periodic tests of a key level, traders should get ready for another rally soon.
AAPL doesn’t mess around with its 50-day moving average very often, but when it does, it uses it as a springboard. With shares trading less than 1% above that key level, AAPL stock is set to bounce higher.
S&P 500 Stocks to Buy: BorgWarner Inc. (BWA)
Click to Enlarge BorgWarner Inc. (NYSE:BWA) has a reasonably bright outlook this year — helped by higher sales of turbochargers and a pick-up in the drivetrain segment — and the stock is starting to reflect the projected growth.
BWA hit a death cross almost six months ago and is finally set to recover. Indeed, shares just carved a golden cross this week and resistance has become support. After spending much of the last 52 weeks stuck below its 50-day moving average, BWA is now finding support at that key level, which is in a strong uptrend.
BWA is also entering a prolonged period of strong seasonality. Over the last 10 years, BWA has generated an average price gain of 6.3% in April, according to data from Thomson Reuters Stock Reports. May has been good for an average gain of 3.1% over the years, while June has delivered 0.2%.
S&P 500 Stocks to Buy: Ecolab Inc. (ECL)
Click to Enlarge Ecolab Inc. (NYSE:ECL) spent the last half of 2014 looking terrible, with lots of volatility only leading to further declines. A death cross late in the year was the final blow. But the cleaning-products company’s strong showing in the fourth quarter changed a lot of attitudes, and now it’s set to reclaim even more lost ground.
ECL broke above its 50- and 200-day moving averages in February after months of languishing beneath the key levels. With some price momentum at its back, Ecolab is now comfortably above both levels. Indeed, ECL made a golden cross in late March and now the 200-day moving average is once again in an uptrend.
Additionally, this is usually a good time of year for ECL, with average gains of 3.6%, 0.1% and 0.8%, respectively, over the next three months.
S&P 500 Stocks to Buy: Ford Motor Company (F)
Click to Enlarge Ford Motor Company (NYSE:F) is another stock in a seasonal sweet spot that just carved out the buy signal of a golden cross. Maybe it’s the spring buying season — or just good luck — but F stock gains an average of 14.5% in April.
True, U.S. car sales weren’t great in March — Ford slipped 3% year-over-year — but analysts remain bullish on the full year.
Throw in some technically promising signs, and F looks good for short-term outperformance.
F is back above $16 a share for the first time in six months, and resistance at the 50- and 200-day moving average have at least become levels of support. Furthermore, F made a golden cross at the end of March.
If it rebounds from any selloff on sales, the technical story remains intact — and so does the probability of a hot month.
S&P 500 Stocks to Buy: Rockwell Automation (ROK)
Click to Enlarge Rockwell Automation (NYSE:ROK) is making a golden cross to start off the month after a successful test of its 50-day moving average. Some decent seasonality bodes well for a good month ahead too.
Rockwell is getting hammered by the stronger dollar, and that’s been playing havoc with the stock, but a prolonged period of recovery remains on track. After bottoming out in October, ROK entered an uptrend but found resistance at its 200-day moving average. Then, in stages, it broke above that key level and the 50-day too.
ROK now has support at these moving averages as they make a golden cross. If traders respect that buy signal, you can bank on more upside, at least in the short term. Historically, ROK delivers and average price gain of 1.1% in April.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.