Sifting through the S&P 500 using technical analysis to find stocks to buy for July yields some interesting names from the financial and materials sectors of all places.
But then, a broad swath of stocks should do well as we head into the middle of summer.
After all, since 1928, July is the best month for market performance, putting up a price gain of 1.5%, according to Yardeni Research.
Tactical investors always want more, though, and they improve their odds of market-beating success by considering the technicals and seasonality of any potential stocks to buy. That’s why we went through the S&P 500 looking for stocks that had some combination of price momentum, a history of summer outperformance and positive news flow.
All these companies have something in common besides being components of the benchmark index for U.S. equities. In every case, these stocks are on the cusp of or carving out a golden cross — a very bullish technical signal. In many cases, being within striking distance of a 52-week high also adds fuel to the price momentum and helps confirm the wisdom of using that golden cross as a buy signal.
A 10-year history of solid performance at this time of year is also a consideration, as are some other aspects of their charts.
Add it all up, and you get these five stocks to buy for some midsummer outperformance:
Stocks to Buy: Bank of America (BAC)
BAC just hit a golden cross and heads into the month with some serious momentum. Shares are up nearly 7% over the last month alone, putting them in striking distance of their 52-week highs.
It also doesn’t hurt that BAC is up more than 14% in an otherwise disappointing year for stocks, and that the 200-day moving average is in a long-term uptrend.
Finally, BAC stock traditionally does very well during the hottest months of the year, with an average price gain of 4.7% in July and resilient 0.2% in August, according to data from Thomson Reuters Stock Reports.
Stocks to Buy: Ameriprise Financial (AMP)
Click to Enlarge Ameriprise Financial (AMP) gave the technicians a scare back in April. Disappointing earnings — higher costs, low rates and market volatility were to blame — led the stock to describe a death cross.
Happily, shares have reversed that trend — now, they’re flashing a buy signal with an impending golden cross.
AMP has some other healthy technical attributes to boot.
For one, it’s in a long-term uptrend — a sign of a healthy stock — and when it violates its 200-day moving average, it doesn’t do it for long.
On a seasonal basis, it appears that Ameriprise likes this time of year. Over the last decade, AMP stock has put up a price gain of 2.8% in July and 2.3% in August.
Stocks to Buy: Assurant (AIZ)
Click to Enlarge While most of the big health insurers are coping with the Affordable Care Act with mergers and acquisition, Assurant (AIZ) decided to just exit the entire business — and the market couldn’t be happier!
AIZ has been in a steep rally for about a months now, bouncing from a low of less than $60 to close to $70 a share. In addition to making a golden cross — a buy signal promising more gains ahead — AIZ is about to take out its 52-week MA, which is another source of price momentum.
Historically, seasonality isn’t AIZ’s strongest attribute, but it ain’t bad either. Shares have lost an average of 0.8% in July over the last 10 years, but they’ve recovered with a gain of 2.3% in August.
Stocks to Buy: Eastman Chemical (EMN)
Click to Enlarge Eastman Chemical (EMN) has almost too many headwinds to list these days, including volatility in raw material costs, lower oil prices, increased competition and pricing pressure, and a stronger U.S. dollar.
However, some investors — notably hedge-fund giant David Tepper — think EMN is poised for growth, while offering a discounted share price. That has the stock recovering sharply from May’s 52-week low.
Indeed, despite so many hurdles, EMN has done well enough to make a golden cross little more than a week ago.
In other share-boosting news, Japanese investment bank Nomura upped its rating on EMN to “buy” a few days ago. And historically, shares gain 2.5% in July (but fair warning: they tend to decline during the following month).
Stocks to Buy: Dover Corp (DOV)
Click to Enlarge It’s not hard to find beaten-down industrials stocks, but few have the positive analyst commentary and decent technicals as Dover Corp (DOV). Indeed, Morningstar recently named DOV a top 10 holding for its Ultimate Stock-Pickers Total Return Index.
The usual suspects of lower oil prices and stronger dollar remain a risk, but the Street is happy with the way DOV is managing through those headwinds. Acquisitions, cost cuts and restructuring are seen boosting margins and the bottom line in fiscal 2016.
Dover tends to enjoy July, putting up a gain of 2.5%, on average. But again, like EMN, Dover does tend to lose out in August (by 0.4% on average).
DOV stock is in the midst of making a golden cross, which is always a welcome sign. If it can break through resistance at its 50- and 200-day moving averages, a strong July looks like a lock.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.