13 stocks dodge doomsday in September
by Matt Krantz
Just uttering the word September to investors can trigger a panic attack. Some stocks, though, have defied the odds and turned September into a month to remember in a good way.
There are 13 stocks in the Standard & Poor's 500 index (SPX) (SPY), including ULTA Salon (ULTA), utility NiSource (NI) and grocery story chain Kroger (KR) that have beaten the market doom each of the past Septembers, according to a USA TODAY analysis of data from S&P Global Market Intelligence. All these stocks have delivered gains on average during September the past five years, which is no easy feat.
The ability to dodge September's pain is welcome news for investors given how lousy the month often turns out. September ranks as the worst month of the year for stock returns going back to 1950 on all three major stock market including the S&P 500, Dow Jones industrial average and Nasdaq Composite, says the Stock Trader's Almanac. It's been a rough month recently, too, dropping an average of 1.2% the past five years. Last September wasn't pretty, with stocks dropping 2.6%.
"September’s rating as the market’s worst month is a financial mystery. Since 1970, The S&P and (Dow Jones industrial average) lost money in September 58% of the time," says Ken Winans president of Winans Investments. "It’s not a time for investors to be bold.”
Theories about why September is a treacherous month for investors abound. But investors seem to have their favorite ways to play the potentially dangerous month, which mostly involves hunkering down with stocks that tend to be more insulated against volatility.
The best example is NiSource, which has generated a 4.8% average gain in September the past five years. The Merrillville, Ind.-based provider of natural gas and electricity to Indiana, Ohio, Pennsylvania and four other states is exactly the kind of stock investors turn to when they're feeling nervous. The utility's core business operations tend to be stable, although the company separated its Columbia Pipeline business a year ago. The company's adjusted profit for the quarter ended in September is expected to rise 50% and its market-beating 2.6% dividend yield helps settle nerves.
Another classic defensive play is Kroger. The nature of Kroger's business lends itself to predictability. Kroger hasn't posted a decline in quarter-over-quarter revenue growth since early 2014. Understandably, the stock has sailed through the past five Septembers with an average 3.1% gain.
That's not to say investors completely hunker down in September. The best performing stock during the month is ULTA with its average 10.6% gain the past five Septembers. The company's revenue has grown by a blistering 19% in 10 out of the past 10 straight quarters. The stock gained 3.3% last September, but poured it on with more than 20% gains in September 2014 and 2013. The company is tying into strong growth trends for the cosmetics market, says Mark Astrachan, analyst at Stifel, in a note to clients.
There's always a danger that the downward pressure of September will prove too much for these stocks to overcome. But, analysts think 11 of the 13 stocks have upside left before hitting their 18-month price targets. Kroger, for instance, could rally another 24% before hitting the average 18-month price target of $39.55 a share.
But all these stocks face risk and September has a reputation.
"From a stock standpoint, we remain favorable on the long-term fundamentals (on ULTA) and opportunity for continued share gains but are likely to be more constructive on a pullback, all else being equal," Astrachan says.
Courtesy of usatoday.com