August is one of the sleepier months for equities, but tactical investors get no respite from looking for stocks to buy. That’s especially true at this time of year because next month is historically a dog.
The S&P 500 typically delivers an average price gain of 0.6% in August. That puts it in the middle for seasonal performance. It’s what comes next that tacticians need to brace for, because September has a long-term record of dropping 1.1%. Concentrating on stocks to buy for market outperformance now lets a tactical investor have more of a cushion as we head toward the worst month for equities.
The problem with finding stocks to buy ahead of next month is that it’s exceedingly hard to predict short-term performance. There are, however, tools that can tip the odds in a tactician’s favor.
Stocks with a long pattern of market-beating seasonality help to make a case. Technical strength in the form of a golden cross, a breakout above key levels or oversold conditions are also important. Lastly, it never hurts to have some positive news flow.
With all that in mind, we scoured the market for large-cap stocks exhibiting all of the above. Here are the best bets.
Stocks to Buy: Avis Budget Group Inc. (NASDAQ:CAR)
Avis Budget Group Inc. (NASDAQ:CAR) missed Wall Street’s earnings forecast earlier this week but the market didn’t care because it hiked its forecast. Stocks are forward looking, remember?
The upbeat outlook pulled CAR out of a downtrend quite sharply, setting it up to return to its previous trend of higher lows and higher highs. Additionally, shares recently carved out the buy signal of a golden cross.
On a seasonal basis, CAR has gained an average of 1.9% in August over the last decade, according to Thomson Reuters Stock Reports.
Stocks to Buy: Marriott International Inc (NASDAQ:MAR)
Marriott International Inc (NASDAQ:MAR) is heading into what has historically been a great three-month run. Over the last 10 years MAR gained an average of 1.8% in August, 2.7% in September and 1.4% in October.
Recent technical strength suggests that it won’t go against its own grain this year. MAR just went through a golden cross.
A recalibration in light of the expected impact of the Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT) acquisition looks to have run its course. The closing, which is expected in the coming weeks, could even be a catalyst.
Stocks to Buy: Microsoft Corporation (NASDAQ:MSFT)
The market hasn’t been this upbeat on Microsoft Corporation (NASDAQ:MSFT) in a very long time. Investors love the cloud services business and approve of its deal to buy LinkedIn Corp (NASDAQ:LNKD). Meanwhile, costs are down and productivity is up.
Just have a look at MSFT’s chart. It has gone vertical since late June, breaking resistance at its 50- and 200-day moving averages along the way. A brand new golden cross promises more outperformance in August.
Shares typically go on a tear around this time of year, with average gains of 1.2% in August, 1.2% in September and 6% in October.
Stocks to Buy: Principal Financial Group Inc (NYSE:PFG)
Principal Financial Group Inc (NYSE:PFG) beat analysts’ average estimate when it reported quarterly results, as assets under management and operating margins offset the continued effects of ultra-low interest rates.
The solid quarter comes at a good time for PFG. It’s a seasonal outperformer in August and September with gains of 1.5% and 0.6%, respectively.
The technicals are looking good too. Shares blasted through their 50- and 200-day moving average last month and went on to form a golden cross. And they have yet to relinquish their upside momentum.
Stocks to Buy: Xilinx, Inc. (NASDAQ:XLNX)
Chipmaker Xilinx, Inc. (NASDAQ:XLNX) can thank acquisition rumors for starting its recent run of outsized gains, but the fact is that the fundamentals support further upside all by themselves.
After all, XLNX beat the Street’s profit and sales forecasts in the most recent quarter, driven by strength in its communications & data center division. More importantly, issued an upbeat outlook.
XLNX bounced off support at the 50-DMA in early July and has been building momentum since. A golden cross in the middle of the last month and a historical average gain of 1.5% in August should give this name an edge.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.