The final quarter of the year is typically a good one for stocks, but that doesn’t mean you have to settle for whatever the broader market hands you. The key is finding stocks to buy for the next few months that are set up — in a number of ways — to outperform.
Going back many decades, the S&P 500 has delivered an average price gain of 0.5% in October, according to Yardeni Research. Not bad at all. Passive investors should be happy with such returns.
However, tactical investors don’t have the luxury of just going with the tide. The whole point of such an approach is to generate alpha.
Otherwise, you’re just racking up trading fees.
It’s extremely difficult to predict short-term equity performance, but there are a number of tools that can tip the odds in your favor. Stocks entering a period of market-beating seasonality are always worth checking out. If they have bullish technicals, so much the better. And it never hurts to have upbeat fundamentals or positive news flow.
After screening the market for top stocks to buy with attractive seasonality, technical charts and fundamental momentum, we came up with a rather long list of names. These are the top five stocks to buy for October:
Top Stocks to Buy for October: ConocoPhillips (COP)
ConocoPhillips (NYSE:COP) has a lot going for it.
The market tends to love this oil titan in the final quarter of the year. Indeed, ConocoPhillips is a seasonal champion. Over the past 10 years, COP shares have produced an average gain of 0.6% in October, 0.8% in November and 2.8% in December, according to data from Thomson Reuters Stock Reports.
An attractive-looking chart also indicates that ConocoPhillips should hold up its end of the bargain. The stock made a golden cross at the end of September that turned moved the 50-day moving average into an uptrend.
But the biggie that’s already pushing shares higher? Oil prices.
The United States Oil Fund LP (ETF) (NYSEARCA:USO) is up more than 20% off its August lows, and is getting even more of a boost now that an OPEC deal to cut output looks even likelier than ever.
All of these factors should conspire in COP stock’s favor. If oil cooperates, expect ConocoPhillips to be a significant market-beater.
Top Stocks to Buy for October: Cooper Tire & Rubber (CTB)
Speaking of uptrends, Cooper Tire & Rubber Co. (NYSE:CTB) is taking off.
Cooper Tire & Rubber recently was upgraded to a “Buy” by Zacks Investment Research and reiterated as a “Buy” by FBR & Co. The company has been on a run since late July, sparked in large part by its August earnings report in which the company recorded record profits. Even if new car sales have peaked, they’re still running at very high levels. Low unemployment, rising wages and an uptick in consumer confidence offer a nice tailwind for now.
The very short-term 20-day moving average crossed the 200-day MA on the way up in the middle of last month. The 50-day followed a couple weeks later to form the bullish golden cross.
And strong seasonality should ensure that CTB finishes the year on a high note.
Cooper Tire’s shares have generated an average price gain of 1.2%, 5% and 8.5% in October, November and December, respectively, over the past decade.
Top Stocks to Buy for October: Liberty Media Group (LMCA)
The Liberty Media Group (NASDAQ:LMCA) caught a downgrade recently on valuation because the stock has been on a tear. That’s fair enough for the mid- to long-term, but in the here and now, that doesn’t really matter.
If anything, an overcooked LMCA promises more upside on momentum alone.
Certainly a recent golden cross supports that view, as does the fact that its long-term 200-day moving average has flattened out after a long period of decline. The catalyst for all this good news was Liberty Media’s recent purchase of Formula One for $8 billion.
In another bullish note, the market tends to love LMCA around this time of year. Over the past 10 years, shares have delivered an average price gain of 6.6% in October and 1.7% in November.
Top Stocks to Buy for October: Roper Technologies (ROP)
From healthcare to technology to energy, Roper Technologies, Inc. (NYSE:ROP) develops software and engineered products for pretty much any industry you can name.
It’s an under-the-radar stock, but its performance deserves attention thanks to solid technicals and some positive analyst commentary.
ROP shares carved out a golden cross in mid-September, then found support at their short-term 20-day moving average. Momentum has started to slow, but a history of market-beating seasonality bodes well for more gain this month. Shares have gained and average of 4% in October, 2.8% in November and 1.5% in December over the last 10 years.
If you’re looking for fundamental soundness, note that Roper is an attractive free cash flow story. Not long ago, Moody’s said it has robust credit metrics thanks to its competitive position in a wide range of industries.
Top Stocks to Buy for October: Tiffany (TIF)
The strong dollar has been giving Tiffany & Co. (NYSE:TIF) a rough time of it, but the holiday selling season might just give shares a respite.
Over the past decade, TIF stock has delivered an average price gain of 4.7% in October. November is flat, but Tiffany typically rebounds with a 3.3% gain in December.
It’s reasonable to expect Tiffany to perform to its average in 2016 too, given improvements seen in its stock chart. Shares found critical support at their 200-day moving average last month. The resilience spring-boarded them through a golden cross. More impressively for the short-term, TIF has tested support at its 20-day moving average with repeated success.
Sentiment seems to be coming around Tiffany as well. Two analysts initiated coverage on TIF stock with buy ratings last week.
And something that will give management gray hairs, but could be good for shareholders in the short-term: The market is hearing rumors that Tiffany could be an acquisition target for Bill Ackman’s hedge fund.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.