The market just had its worst start to a year in history, but that’s the sort of performance that should have tactical investors looking for stocks to buy. After all, you want to pick up stocks when they’re cheaper, not more expensive.
Furthermore, it’s still far too soon to call January a bust. Indeed, over the long term, the S&P 500 has delivered an average price gain of 1.2% this month, according to Yardeni Research. Only April, July and December are better months for stocks.
And just because the market is suffering through a widespread draw down, that doesn’t mean there are no stocks exhibiting strong technical indicators amid a period of seasonal strength. If a tactical investor wants to find stocks to buy in such an environment, technicals and seasonality are a good way to find short-term bargains that will outperform the broader market even if it does log a loss this month.
Screening the U.S. market for stocks with favorable seasonal trends and technicals generated a motley list of names. Among those, these are the most promising stocks to buy for January. (Charts courtesy of StockCharts.com.)
Stocks to Buy: Ball Corporation (BLL)
Click to Enlarge Ball Corporation (BLL) hasn’t been immune to the market’s horrible start to the year, and that makes the technical strength it’s showing all the more remarkable.
Shares in the aluminum can maker lost nearly 2% so far this year, but favorable signals and seasonality mean a rebound is in store.
BLL found support at its 50- and 200-day moving averages in the selloff — always a good sign — and recently carved out the buy signal of a golden cross.
Lastly, the market likes this name at this time of year. Over the last decade, BLL has enjoyed an average January gain of 1.1%, followed by 3.6% in February and 2.1% in March, according to Thomson Reuters Stock Reports.
Stocks to Buy: Charles River Laboratories (CRL)
Click to Enlarge The technical jury is still out on Charles River Laboratories (CRL) but it’s on track to pass a current test.
CRL made a golden cross in late December, but its price momentum was interrupted by the selloff to start the year. That said, CRL remains above its 50- and 200-DMAs and recent trading shows it finding support at the 50.
Fundamentals should help support the stock too. Recent acquisitions will greatly expand the drug testing company’s footprint, which included work on more than half of all drugs approved last year.
On a seasonal basis, CRL is on a hot stock. Shares have put up an average January price gain of 6.1% over the last 10 years. February and March hit 1.1% and 3.6%, respectively.
Stocks to Buy: Spectrum Brands Holdings, Inc. (SPB)
Click to Enlarge Boring old Spectrum Brands Holdings, Inc. (SPB) could be a pretty exciting bet this month.
SPB makes everything from Rayovac batteries to Cutter insect repellent to the George Foreman grill. It remains on an acquisitions tear and yet still generates respectable organic growth. That has SPB up 4% over the last three months with high-flying technicals behind it.
SPB went through a golden cross when the market was getting pounded last week and remains well above its 50- and 200-DMAs. Indeed, shares rebounded sharply on Jan. 8 and are about 4% above both levels.
As for seasonality, the market likes SPB right about now. Shares have an average January price gain of 2.5% over the last 10 years.
Stocks to Buy: Sanderson Farms, Inc. (SAFM)
Click to Enlarge Sanderson Farms, Inc. (SAFM) spent all of last year trying and failing to make a definitive move above its 50-day moving average.
It was a drag. SAFM broke through the 50 repeatedly last year but could never sustain momentum for long. Happily, that looks to have changed thanks to a strong earnings report at the end of last year.
Shares in the poultry company first made it above the 50-DMA around Thanksgiving and have found support there ever since. Heck, SAFM even cut a golden cross at the end of last week’s market mayhem and rallied sharply on Monday, helped by an analyst upgrade.
On a seasonal basis, SAFM has produced a market-matching average January gain of 1.2% in the last decade of trading.
Stocks to Buy: Universal Display Corporation (OLED)
Click to Enlarge Traditionally, Universal Display Corporation (OLED) is a market laggard in January, but this year it looks like it will be raising its average.
True, OLED has an average January price gain of just 0.2% to underperform the S&P 500 by about a percentage point. Going forward, however, it picks up serious momentum, rising to 3% in February and 10% in March.
The technicals are likewise reassuring. OLED described a golden cross last month and has a way to go before testing support at key levels.
The stock is about 2.4% above its 50-DMA and a whopping 10% above the 200. An unsuccessful test of those levels would change the story, but at this point momentum remains in OLED’s favor.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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