It’s summertime … or at least it will be in a little over a month. But, near the end of the school year, with fishing trips and baseball games in full swing and vacations being planned, investors are already thinking about anything other than searching for stocks to buy and stocks to cull.
Underscoring that lack of interest is the sheer fact the market has given us no reason to suspect the next few months will bear any real fruit.
And yet, on the off chance stocks do buck the “Sell in May” axiom and perk up this summer while investors are off doing other things, few investors want to be out of the market altogether.
Not to worry. Here’s a look at 10 stocks to buy headed into the most distracting time of the year. These names have been hand-picked specifically because investors and traders don’t need to worry about watching them around the clock during the summer.
It’s admittedly a bit cliche to make a point of owning a sporting goods store like Cabelas Inc (CAB) in the middle of summer; rarely do such obvious trades pan out. Besides, those who know CAB well know that summertime isn’t its sweet spot. Its big quarter is still the fourth quarter of the year, as it’s a holiday-shopping destination.
Nevertheless, numbers don’t lie. CAB stock is a proven summer performer, usually gaining double digits between the beginning of June and the end of July.
That said, the summer of 2016 could be a particularly rewarding one for Cabelas shareholders. After losing 20% of their value in 2014 and losing another 11% in calendar 2015, CAB shares are finally showing forward momentum with a year-to-date gain of a little more than 8%.
Diageo plc (DEO)
Do you know what the most reliably productive group of stocks is?
Incredibly enough, it’s distillers and vintners.
Since 1998, the group has gained an average of just under 20% per year, and the vast majority of those years they’ve produced positive results — an impressive given the depth of the economic struggles we’ve faced since then.
And here’s the kicker: Even in losing years for the distillers/vintners group, summer still seems to be the most rewarding time of year for the group’s stocks. The overall average gain for distiller names between the beginning of May and the end of August is just under 8%.
Diageo plc (ADR) (DEO) has some of the most top-of-mind brands on Earth, including Smirnoff and Guinness, and looks like the best booze bet right now.
Altria Group (MO)
Altria Group Inc (MO) is a relatively common constituent on lists of safe, reliable stocks to buy. After all, tobacco is an addictive vice, which effectively guarantees at least some degree of perpetual cash flow.
That’s why they’re particularly well-positioned to be sought out as safe havens if and when other industries hit a headwind this summer.
MO does differ from all the other names on this list of 10 safe set-it-and-forget-it summer stocks to buy, though … it’s the only one an investor wouldn’t be wise to plan on holding onto for the long haul. Why’s that? Tobacco companies are fighting a cessation battle they have no hope of winning — there’s no real “growth” in store for tobacco companies. Sooner or later, investors will figure out these names are priced like growth stocks, and they’ll make the adjustment.
In other words, don’t get married to MO if you choose to take a quick puff this summer.
American States Water (AWR)
When’s the last time you didn’t have access to running water? If you’re like 99.9% of people living in the United States, the answer is most likely a resounding “never,” pointing to the an impressively reliable stream (no pun intended) of revenue and profits for the companies that push water through your pipes.
While that consistency (bordering on a legalized monopoly) makes these names year-round winners, the middle of the year is particularly fruitful for water utility stocks. As a whole, these names gain an average of more than 5% over the course of May, June and July.
American States Water Co (AWR) looks like the best opportunity right now, having peeled back in February and March. Just be advised that if you add AWR to your portfolio in the near future, most of these names are pushing their luck with their present valuation. Any summer strength isn’t guaranteed to persist into fall.
It’s admittedly tough to be hopeful with any energy stocks right now, let alone be willing to take your eyes off of them for the next few months.
But in this case, the situation is right, and BP plc (ADR) (BP) rates as one of the better oil stocks to buy headed into the this time of year.
A big part of the aforementioned “situation” is a real rebound in commodity prices, including oil. Crude has gained more than 40% from its February low, as enough of the industry’s suppliers have stopped pumping the stuff — or at least threatened to — enough to push the supply/demand balance closer to the norm.
In the meantime, BP shares have yet to rebound nearly as much as its peers have, up only 14% since February. This relative weakness thus far leaves little downside, and a good deal of upside.
And it’s not just an urban myth — gasoline prices really do tend to be higher in the summer than in other months, although not for demand reasons. While oil drillers and refiners don’t necessarily make a lot more money in the summertime, most of them manage to sneak in a bottom-line bump.
Procter & Gamble (PG)
Much like distillers and vintners, household and personal product stocks tend to outperform other industries’ stocks in the summertime. And like distillers, these names tend to do well between late June and mid-September, even when these names are on pace for a losing year. On average, the group gains just under 4% for that time frame.
It’s not a ton of money, but for a three-month stretch when not much else does well, it’s not a bad bet.
And one curiosity about the timing of any trade — in good as well as bad years, the buy-worthy low almost always seems to show up in the third week of June.
Just use Procter & Gamble Co (PG) — maker of Tide and countless other can’t-miss, must-have brands — as your proxy.
Chatham Lodging Trust (CLDT)
Care to scrape off a little income this summer no matter how long you hold a position?
Most dividend payers only dish out cash payments every three months, forcing an investor to make a tough decision if he or she is only looking for a summertime fling. If that’s your potential dilemma, add Chatham Lodging Trust (CLDT) to your list of stocks to buy sooner than later.
See, CLDT pays a monthly dividend. The annualized yield of 5.9% isn’t too shabby, either. Even the dividend payments for just three months would pay better than a year’s worth of bank deposits.
That said, Chatham Lodging Trust is a particularly potent play for the near future. Not only is summertime — when travel is brisk — its bread and butter, but REITs as a group have been particularly hot of late.
SPDR S&P Biotech ETF (XBI)
Biotech stocks as a safe summertime holding, especially now, here in the shadow of a biotechnology sector nightmare?
There’s no denying that when biotech stocks are cold, they’re downright frigid. When they’re holding up though, summertime is their prime time. The average May-July gain for the SPDR S&P Biotech ETF (XBI) is a healthy 11%.
Inasmuch as the biotech sector is working on a rebound right now — and has plenty of room to recover — XBI is actually a lower-risk, higher-reward holding for the foreseeable future.
General Electric Company (GE)
General Electric Company (GE) as a safe summertime play? Booooriiing.
OK, it may be an absurdly predictable name, with as little perceivable upside as there is potential downside. But that’s the point. Should things remain dull or get a little ugly over the course of the next few months, a marketwide flight to safety puts GE at the top of many lists of stocks to buy.
If instead the market manages to piece together some bullishness for the summer, General Electric still has a couple of aces up its sleeve it could play to draw a crowd.
That ace is its “Predix” platform, which is quietly but quickly becoming the all-encompassing must-have software for manufacturing organizations (among others) that realize they’re better served by being able to monitor and control their entire operation centrally.
It’s still a relatively new product, meaning most investors don’t even know to look for the growth Predix could drive. The next couple of quarterly reports may open their eyes in a bullish way.
Verizon Communications (VZ)
Last but not least, add Verizon Communications Inc. (VZ) to your list of stocks to buy if you don’t want to sweat your portfolio while you’re on the golf course or on the beach this summer. Although VZ shares jumped more than 20% between January and April, that rally has been reeled in quite a bit, burning off a great deal of the pullback risk Verizon had been posing as of a month ago.
The arguments are a tad obvious, but have their merit all the same. It’s unlikely the telecom tollbooth would dish out any unwelcome surprises, and along the way it pays a decent dividend of 4.4%.
One noteworthy event in the cards that should (well, could) serve as a potential bullish catalyst: Verizon is still in the running as a suitor for Yahoo! Inc.’s (YHOO) core business. It’s pretty well agreed Yahoo’s assets in question would bear more fruit with Verizon in charge than the web company’s current leadership.
Even without that acquisition, though, VZ doesn’t pack any major downside risk.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.