We still have a month or so of historically volatile market conditions to make our way through. September hasn’t at all been disappointing in that regard — it’s been an exciting roller-coaster ride through most of the months. And so far, we’ve managed to come away mostly unscathed.
Still, investors should be starting to hone their lists of stocks to own during the seasonally strong October-through-December period.
We recently ran our year-end model portfolios against the seasonally strong period to narrow the 7,000-plus companies tracked by our database. The goal: Find companies that have attractive seasonality results and rank high according to our Behavioral Valuation model.
The following are 10 stocks to buy, and soon. Every investor should be considering at least a couple of names from our lengthy list as candidates for year-end outperformers.
Stocks That Should Be in Your Portfolio: Marriott International (MAR)
Revenues at Marriott International Inc (NASDAQ:MAR) have been on the rise as travelers are taking to the road more frequently. At the same time, margins are growing, resulting in earnings results that are outpacing the market.
Marriott shares have struggled since topping out last year; however, that trend is changing.
The consolidation that has taken place since March is now transitioning into an intermediate-term bullish trend as volume is on the rise — the signature of a trend that is gaining traction. The fact that sentiment toward Marriott has been pessimistic indicates that MAR shares are set to climb the “Wall of Worry” through the rest of the year.
Marriott has high short interest and low buy recommendations — one of our favorite one-two punches. We think MAR stock can hit $80, good for a nearly 15% run before year’s end.
Stocks That Should Be in Your Portfolio: Lexicon Pharmaceuticals (LXRX)
Biotechnology companies are coming back after almost a year of declines and pressure. Despite strong fundamentals, investors haven’t had the appetite for risk in this sector, leaving plenty of opportunities as money is now flowing into the sector again.
Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) is a biopharma company whose clinical drug candidates are aimed at treating irritable bowel syndrome and type 2 diabetes, among other conditions.
It’s also a strong candidate to beat the market for the rest of the year.
LXRX shares are prepping a move above $20 for the first time 2009, which is attracting the attention of technical traders. At the same time, short sellers are on the wrong side of the move as 19 times the average daily volume is tied up in bearish bets. A break above $20 would be a sure-fire trigger for a powerful short covering rally.
Stocks That Should Be in Your Portfolio: Paychex (PAYX)
The Nasdaq-100 Index is one of the strongest seasonal performers for the last quarter of the year, along with its component companies — and that includes Paychex Inc (NASDAQ:PAYX).
The payroll resources company has been expanding its business as the jobs market continues to grow. Those results have Paychex stock pushing to new all-time highs.
Like the other stocks on our list, PAYX is incredibly underappreciated by investors and Wall Street analysts. Currently, only 10% of the analysts tracking the stock have it ranked a buy, while the short interest outstanding on the shares accounts for 14 days’ worth of average volume.
Stocks making new highs with this much pessimism are bound to attract a lot of new attention. We like Paychex to outpace the market through year’s end, with our models targeting a price of $68.
Stocks That Should Be in Your Portfolio: First Financial Bancorp (FFBC)
Regional banks are getting a boost in the current interest-rate environment. Earlier this week, the Federal Reserve made it clear that higher rates are coming — good news for the regionals that make their money on balance sheets, not investments.
First Financial Bancorp (NASDAQ:FFBC) is an Ohio-based bank that has been expanding in the area aggressively. Revenues and earnings have been strong for the past two years as a result, which also is making FFBC a decent candidate for mergers & acquisitions activity.
First Financial has posted a strong 22% return year-to-date against a regional bank sector that broadly is barely in positive territory. In addition to the performance, the stock trades with lower volatility than the sector, making it even more attractive. Yet only 22% of the analysts tracking the stock have it ranked a buy, leaving a lot of room for upgrades.
FFBC just broke above the technically significant $21 level, which has volume on the rise. This signals growing interest in this underappreciated stock. Our model suggests that the migration of money to this stock will target a move to the $24-$25 price range, or about 14% upside.
Stocks That Should Be in Your Portfolio: Pinnacle Financial Partners (PNFP)
Another commercial bank in the same situation as First Financial Bancorp is Pinnacle Financial Partners (NASDAQ:PNFP).
Year-over-year revenue for this financial grew by an average of more than 50% over the last two quarters, catapulting shares from $48 to $55. That strong growth should be enhanced by higher interest rates.
The stock’s sentiment picture is similar to the other financials on our list. The stock looks undervalued by the market and ready to move higher as it breaks through overhead resistance. That resistance sits at $57 and has held PNFP at bay for each of the three times it has been challenged since July 2015.
A break above the $57 level will start a shift in sentiment, turning the sellers into buyers and drawing upgrades from Wall Street. This push will target a move to $65 — 18% higher from here.
Stocks That Should Be in Your Portfolio: Cincinnati Financial (CINF)
Insurance company Cincinnati Financial Corp (NASDAQ:CINF) has been on our list of “companies to own” for more than three years. The company continues to make improvements to its growing lines, which has resulted in better revenue and margins.
Apparently, Wall Street analysts and short sellers haven’t gotten that memo.
Currently, only 20% of the analysts covering Cincinnati Financial stock have it ranked a buy. Come on! This is a company that has bested its peers in performance for more than two years. Similarly, short sellers continue to bet against the stock as the short interest ratio remains high at 7.6.
Cincinnati Financial stock has been making new highs since 2014, meaning we’re still seeing the stock climb that Wall of Worry. This wall should target an additional 15% move to $87.
Stocks That Should Be in Your Portfolio: Agios Pharmaceuticals (AGIO)
Agios Pharmaceuticals Inc (NASDAQ:AGIO) is a pharmaceutical company that our model has picked up as an end-of-the-year rebound candidate.
Recently, the stock plummeted from $60 to $40 after weaker revenue and earnings results; However, Agios is beginning to see some positive news regarding its product line.
And from a technical perspective, the recent bounce from $40 has solidified a base for the stock to move from. Now, we’re seeing the technical trends improving. This technical improvement will help to trigger a short squeeze rally on sustained prices above $50, which the stock just crossed.
Our target price for Agios over the next two months remains at $60 — 14% higher from current prices — based on the improving technicals and resulting short squeeze rally that is in the process of being triggered.
Stocks That Should Be in Your Portfolio: Baxter International (BAX)
Most healthcare companies were hit hard over the past year as political rhetoric caused a lot of uncertainty over pricing and regulations that could negatively affect bottom lines.
Baxter International Inc (NYSE:BAX) wasn’t immune to this, as shares dipped to $32 a year ago — also amid a slowdown in revenues.
However, a year later, revenue has moved back into positive growth territory, and share prices are headed in the right direction.
Our current models have Baxter ranked a strong buy based on the stock’s relative strength and a lack of optimistic sentiment from Wall Street. Last year’s lows also saw downgrades to Baxter shares, and to date we’ve not see those analysts return as buyers. With only 20% buy recommendations from Wall Street, we expect to see BAX garner upgrades in the fourth quarter after another report featuring positive revenue and earnings growth.
The expected upgrades should result in a year-end price around $55 per share, or 15% higher.
Stocks That Should Be in Your Portfolio: Insulet (PODD)
Another stock from the healthcare equipment and suppliers group that has high marks from our rating models is Insulet Corporation (NASDAQ:PODD) — the lesser-known name behind the OmniPod Insulin Management System.
Insulet shares struggled through 2015 and 2016 as earnings wavered. The company has been able to improve the trend over the last two quarters, however, resulting in a tradable trend that is preparing to propel the stock back to $50.
A relatively high amount of short interest on PODD shares should be one of several catalysts for a move; more than 12 times the average daily volume for the shares is tied up in bearish bets. But Insulet is moving above $45, so it’s likely these short sellers are about to start covering, sparking a rally.
The combination of short covering and momentum behind the current technical strength has our models targeting 11% gains through year’s end to $50 per share.
Stocks That Should Be in Your Portfolio: Cisco Systems (CSCO)
An old-school technology favorite of ours is Cisco Systems, Inc. (NASDAQ:CSCO).
Like many in the space, Cisco has spent years reinventing its products to adapt to the changing technology market — something that has paid off with improvement to the company’s earnings results. Revenues are barely inching higher, but CSCO’s expansion into the “Internet of Things” should increase the top line.
Technically, Cisco shares are preparing to move above their 2007 highs as they close in on $35. The technical picture has been gaining strength while CSCO continues to trade above its key trendlines — all of which are ascending. So there’s some bullish news.
Cisco shares have been the target of positive brokerage comments lately, meaning we are likely to see even more upgrades to build on the 57% buy recommendations currently held on the stock.
This, along with the strong technicals, puts a year-end target price of $35 on Cisco Systems by year’s end — a double-digit improvement.