October is an ideal time to search for stocks to buy, as it historically kicks off the best three-month period for stocks in any year. High hopes for the holiday selling season, coupled with investor propensity to window-dress results before the year’s end, usually leads to sustained and accelerating gains.
That said, tactical investors may have a hard time finding stocks to sell as the market starts to take off. Heck, it very well may not.
Since 1928, the S&P 500 has generated an average price gain of 0.4%; it follows that up with a 0.7% rise in November and closes the year with a jump of 1.4%.
But that’s just an average, and it won’t be surprising if the market remains flat or declines as we approach 2016. After all, it’s been a weak year for equities.
That’s why it’s imperative for tactical investors to find stocks to buy that are ready to rise regardless of what the market does. Names with technical strength and positive year-end seasonality increase the odds that these stocks will pay off.
After screening the market for technical strength and historical seasonality, we found a short list of stock to buy with market capitalizations of at least $2 billion. These were the five that stood out from the rest.
Stocks to Buy for October: C.H. Robinson Worldwide (CHRW)
Click to Enlarge Over the last 10 years, freight transportation company C.H. Robinson Worldwide (CHRW) has exhibited market-beating seasonality.
CHRW starts out a bit slow, with an average price gain of 0.3% in October, according to data from Thomson Reuters Stock Reports, but it accelerates from there. The final two months of the year have track records of delivering market-beating gains of 3.2% and 2.8%, respectively.
On a fundamental level, CH. Robinson Worldwide is sensitive to the U.S. economy because it’s a transport stock. Happily, unlike much of the world, the domestic economy is doing fine.
But the most bullish indicator for CHRW in the short term is the technical picture. Shares recently breached their 50-day moving average to the upside and are in the process of making a golden cross.
That’s two clear buy signals right there.
Stocks to Buy for October: Cooper Tire & Rubber (CTB)
Click to Enlarge The market for Cooper Tire & Rubber’s (CTB) product category is in a period of expansion. In the most recent quarter, CTB enjoyed record operating profit from its Americas segment, boosted by volume and margin increases. That helped the stock score some analysts upgrades.
This fundamental strength has investors rewarding CTB with a market-crushing gain of 19% year-to-date. That has put CTB in a technically positive position.
CTB carved out the buy signal of a golden cross late last month and — save for a brief selloff — has maintained momentum ever since.
As for seasonality, October has been a dud over the last decade with an average loss of 0.4%, but CTB puts the pedal to the metal soon enough. The stock rises an average of 5.8% in November and 9.6% in December.
Stocks to Buy for October: MGM Resorts (MGM)
Click to Enlarge Casino stocks like MGM Resorts (MGM) have been hammered by China. A government crackdown on corruption scared the big rollers out of Macau, which is bad enough. Making matters worse, the Chinese economy is slowing down and the stock market crashed.
Despite all that, there’s hope for MGM in the short term. News that the government is considering lending economic support to Macau sparked a rally in casino stocks. And what’s more, MGM is in a technically favorable position.
MGM drew a golden cross at the beginning of the month, and soon after breached its 200-day moving average to the upside. The 50-day MA is now just a 1% gain away.
True, MGM has a terrible October track record, tumbling 5.6% on average over the last 10 years, but that average includes Octobers clobbered by China weakness — something that could be mitigated this year by the optimistic news for Macau.
For November and December, however, MGM adds 3.8% and 6.6%, respectively.
Stocks to Buy for October: Signet Jewelers (SIG)
Click to Enlarge It should come as no surprise that Signet Jewelers (SIG) does well overall on the back of the holiday selling season, but in years past it has occasionally stumbled.
The October average price gain of 0.9% easily beats the market, but SIG traditionally stumbles in November with a 1.6% decline. However, Signet more than makes up for that with a 4.7% gain in the final month of the year.
Known for its marketing prowess, the parent of Kay Jewelers and Jared finds itself entering a strong sales period at a time when the retail jewelry business is doing quite well.
As much as those fundamentals help SIG, it’s the technical picture that seals the deal as a short-term gainer. True, Signet has been volatile of late, but it made a golden cross not long ago and remains comfortably above its moving averages.
Stocks to Buy for October: Molson Coors (TAP)
Click to Enlarge Anheuser Busch InBev (BUD) is trying to acquire rival SABMiller (SBMRF), but as the brewers haggle over price, it’s clear that the big winner in such a deal will be Molson Coors (TAP).
If the deal goes down, the combined entity will be forced to sell its 58% stake in its U.S. joint venture with TAP to win antitrust approval. The most likely outcome is that TAP will get to buy the stake at a significant discount.
The news blasted TAP into a technically positive position. Shares jumped through their moving averages in mid-September to hit an all-time high and are now on the cusp of a golden cross.
Seasonality is good, and this year’s deal-driven performance should help raise its monthly average. TAP typically rises 0.5% this month, followed by a drop of 0.7% in November and a big 3.6% pop to close the year.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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