July is traditionally the best month of the year for equities, but that only raises the bar for tactical investors looking for stocks to buy. After all, with a historical average price gain of 1.5%, the S&P 500 is tough to beat this month.
At the same time, a market trading on Brexit anxiety has caused the technicals to break down on a wide swath of names. Upside price momentum just isn’t that easy to find right now.
That’s why tactical investors need to find stocks with technical strength and a history of strong seasonality if they’re to outperform the benchmark index this month. Price momentum in the form of encouraging short- and long-term moving averages increases the odds of market-beating returns. So does the flashing of a buy signal like a golden cross.
And then, of course, there’s no replacement for positive news flow or improving fundamentals. Taken all together, strong technicals, seasonal strength and fundamental catalysts improve a tactical investor’s chances for short-term outperformance.
With that in mind, here are five of the best stocks to buy for market-beating results this month.
Stocks to Buy: Booz Allen Hamilton Holding Corporation (NYSE:BAH)
If there’s one thing Booz Allen Hamilton Holding Corporation (NYSE:BAH) has going for it this month, it’s favorable seasonality. Over the last 10 years. BAH has enjoyed an average price gain of 9.2% in July, according to data from Thomson Reuters Stock Reports.
That’s just an average, however, so BAH better have some technicals falling in its favor as well.
The stock recently found support at its 50- and 200-day moving averages after failing a test badly late last month. The new uptrend has BAH carving out a golden cross.
Sentiment improved on BAH after it arrested three years of slumping sales last fiscal year and was rewarded with a credit upgrade.
Stocks to Buy: FNF Group of Fidelity National Financial, Inc. (NYSE:FNF)
Insurance companies can have sneaky seasonal tailwinds. Just look at FNF Group of Fidelity National Financial, Inc. (NYSE:FNF).
FNF isn’t necessarily a market beater in July, but it does mark the start of a three-month run of total outperformance.
Shares gained an average of 1.2% in July, 0.8% in August and 3% September over the last decade. The broader market tends to go into a steep slump over the same period.
And FNF is in good position to extend its summertime success. Shares made a golden cross in June and have gained momentum ever since. FNF is now well above key levels and is targeting a 52-week high.
The insurer posted mixed results in the most recent quarter, but Wall Street expects a second-half rebound.
Stocks to Buy: HCP, Inc. (NYSE:HCP)
HCP, Inc. (NYSE:HCP) usually gets attention for its massive dividend yield of around 6.5%, but after cleaning up some fundamental headwinds, the healthcare real estate investment trust (REIT) is set for price returns too.
HCP announced a spinoff of its troubled HCR ManorCare portfolio into a separate REIT, and cutting that albatross loose changes everything for the stock.
The market has taken notice. Shares overcame resistance at their 50- and 200-day moving averages early last month for the first time in a year. HCP then went on to make a successful test of those keys levels on its way to a golden cross.
On a seasonal basis, HCP gains an average of 5.3% in July.
Stocks to Buy: Scholastic Corp (NASDAQ:SCHL)
Summer is usually good for investors in Scholastic Corp (NASDAQ:SCHL), a children’s and educational publisher. Thanks to investors trying to front-run the back-to-school selling season, SCHL has an average July gain of 1.6%, followed by price returns of 0.5% and 0.7% in August and September, respectively.
SCHL shares are poised to add to those averages as they start July with upside momentum. The stock made two successful tests of support at its 200-DMA last month that launched it through the buy signal of a golden cross.
The recent opening of the Steven Spielberg-directed movie “BFG” lends fundamental support to SCHL, which is the publisher of the book.
Stocks to Buy: Wolverine World Wide, Inc. (NYSE:WWW)
Wolverine World Wide, Inc. (NYSE:WWW) is having an outstanding year thanks to solid earnings and sales gains. Add seasonality and technical strength to the mix and WWW is poised for more outperformance.
WWW clobbered the Street’s profit and sales forecast last month even as it struggles with revenue declines. Part of the bottom-line surprise was driven by new products, and most of those have yet to launch. Anticipation has WWW stock up over 20% for the year-t0-date.
The footwear manufacturer typically gains 2.9% in July, and the way the technicals shape up, it looks ready for more outperformance.
Shares found support at their 50-DMA last month on their way to making a golden cross. Higher highs and higher lows are another indicator of momentum.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.