September is the market’s cruelest month, but that doesn’t mean tactical investors can’t find stocks to buy that are poised to deliver short-term upside. Since 1928, the S&P 500 has logged an average September loss of 1.1%, according to Yardeni Research.
That’s why it’s imperative for tacticians to position their portfolios to avoid the carnage. And if they can actually make some gains this month, so much the better. After all, it’s tough to fight the trend.
Although it’s exceedingly difficult to predict short-term price movements, there are tools available to help nudge the odds in your favor. Chartists know that stocks throwing off strong technical signals have a better chance of immediate outperformance.
By the same token, a history of market-beating seasonality improves a tactician’s chances as well. And, as always, it’s good to have some solid fundamentals or positive news flow underpinning short-term performance in the share price.
A screen of the U.S. market for names with strong seasonality and a track record of outstanding September gains turned up a short list of stocks to buy this month. Here are our favorite five:
Stocks to Buy: Apple (AAPL)
That’s partly just the trade ahead of Apple’s annual iPhone reveal, and it would certainly help if the iPhone 7 could surprise to the upside. But even if it doesn’t, AAPL has technicals and seasonality very much on its side.
AAPL made a golden cross at the end of August, which helped arrest a mid-month reversal. This also tends to be a great time of year for Apple. Over the past decade, AAPL gained an average of 2.3% in September, 5.1% in October and 1.7% in November, according to data from Thomson Reuters Stock Reports.
Stocks to Buy: Biogen (BIIB)
Shares of BIIB average 2% gains in September, 1.6% in October and 4% in November over the past decade. That easily tops anything the broader market has done over the same span.
At the same time, chartists have to be pleased with the technicals as BIIB stock experienced a golden cross late last month. For a number of sessions, BIIB stock just treaded water, but it kicked off September with a strong move to the upside.
The latest price jump can be credited to the Food and Drug Administration giving the biotech’s new Alzheimer’s treatment Fast Track status. It also doesn’t hurt that BIIB is often the subject of M&A rumors in a currently buyout-happy sector.
Stocks to Buy: Buffalo Wild Wings (BWLD)
Just look at the facts — BWLD gained an average of 6% in September over the past 10 years, gaining an average of 0.1% and 1% in October and November, respectively.
Interestingly, BWLD latest earnings report came with some serious blemishes, but the market didn’t care. Earnings easily topped Wall Street estimates, but same-store sales dropped significantly.
Investors, however, shrugged it off due to seasonality and other tailwinds like lower input costs. A late-August golden cross and upside move to start September should allow BWLD to challenge all-time highs again later this month.
Historically, outsized gains tend to accelerate the closer we get to December. Over the past decade, MA has risen an average of 3.4% in September, 7.5% in October and 8.8% in November.
Except for a short period of consolidation, MA has been rallying hard since July. Recent upside momentum — supported by a golden cross — has left MA stock within striking distance of a new record high.
Mastercard beat Street forecasts in its most recent quarter as consumers increased their usage of its cards. That was music to investors’ ears, as was Mastercard’s statement that it doesn’t expect any impact from the Brexit vote this year.
Stocks to Buy: Motorola Solutions (MSI)
MSI delivered an earnings surprise in early August, but investors really responded to the addition of $2 billion to the company’s share repurchase program.
It’s also encouraging that MSI’s acquisition of Airwave Solutions Ltd. gave a bigger-than-expected boost to revenue. Furthermore, it affirmed its full-year guidance.
As for seasonality, MSI is essentially the rump Motorola Inc., so seasonal performance may prove to be an apples to oranges comparison. With that caveat, MSI stock has put up an average September gain of 5.4% since 2006.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.