5 Stocks That Avoid the September Slump
This year's cruel summer in stocks may get worse if history serves as a guide.
The Standard & Poor's 500 has recorded an average decline of 0.4 percent in September over the past 40 years, the worst month for the benchmark index, according to Capital IQ.
The Dow Jones Industrial Average tends to fall 1.1 percent dating back to its beginning in 1896, says Dow Jones Indexes. That compares to an average gain of about 0.7 percent for all other months combined.
Yet, several stocks in the S&P 500, such as Google and Red Hat, tend to outperform.
September has delivered some of the worst beatings in the past decade — as the financial crisis unfolded in 2008, when the Internet bubble kept bursting in 2002 and during the terrorist attacks in 2001.
Investors returning to the stock market after avoiding a tumultuous summer have their work cut out for them.
In August, equities were crushed under the weight of a downgrade of U.S. debt by Standard & Poor's, as well as escalating concerns over European debt. Stocks rallied at the end of August on expectations another asset-purchase plan will be unveiled by the Federal Reserve when the central bank meets Sept. 20-21 to discuss interest-rate policy.
With so much riding on the Fed's next meeting, and given the historical performance of equities during September, investors are rightfully worried about the direction of stocks. As it turns out, some companies have been safer bets during September, based on historical returns in the month of September.
The following five stocks are the best performers on the S&P 500 in September over 10 years, according to data provided by Capital IQ.
As some companies have been publicly traded for less than a decade, like Google , TheStreet is including those that have return data for at least five years.
5. Red Hat
Company Profile: Red Hat provides open-source software services, such as Red Hat Linux, to companies.
Average Return Since 2001: 9 percent
Best September Performance: +37.9 percent in 2003
Worst September Performance: -28.2 percent in 2008
Analysts Ratings: Eighteen researchers, or 72 percent of those covering the stock, rate Red Hat a "buy," including analysts at Wells Fargo, Citigroup, and Stifel Nicolaus.
Another five analysts have a "hold" rating on the stock, while two researchers have a "sell" rating on shares. The average price target of $48.05 is about 22 percent above current levels.
Company Profile: Google is the iconic Internet search and advertising tech giant. The company also builds Web applications and software, including the Chrome Web browser and the Android mobile operating system for handsets and tablet computers.
Average Return Since 2004: 9.2 percent
Best September Performance: +26.6 percent in 2004
Worst September Performance: -13.5 percent in 2008
Analysts Ratings: Google is massively popular with analysts, garnering 38 "buy" ratings from firms including Jefferies, Piper Jaffray and Stifel Nicolaus. The only other four analysts covering the stock say investors should hold on to shares.
Google shares have underperformed the broader market, falling 10 percent this year, but analysts on average expect the stock to climb 34 percent from current levels.
3. Wynn Resorts
Company Profile: Wynn Resorts owns and operates three destination casino resorts: Wynn Las Vegas, Encore at Wynn Las Vegas and Wynn Macau.
Average Return Since 2003: 9.6 percent
Best September Performance: +33.9 percent in 2009
Worst September Performance: -14.4 percent in 2008
Analysts Ratings: Ten researchers rate Wynn a "buy," while the other 17 covering the stock have a "hold" on the shares.
Jefferies is one of the most bullish firms when it comes to Wynn, with a price target of $193. The average analyst price target of $165.29 represents possible upside of 7 percent.
Company Profile: Salesforce.com provides cloud computing to businesses. The company's cloud computingapps offer business customers sales force automation, customer service and support solutions, social media monitoring and engagement, and other application development.
Average Return Since 2004: 9.8 percent
Best September Performance: +26.9 percent in 2007
Worst September Performance: -13.6 percent in 2008
Analysts Ratings: Salesforce.com gets high praise from analysts, even though the stock has dropped about 20 percent since mid-July.
Twenty-seven firms have a "buy" rating on Salesforce.com, including BMO Capital and Canaccord Genuity. Another 10 researchers have a "hold" rating on the stock. Only two analysts say investors should sell shares.
The average price target of $160.69 implies upside of 25 percent. Sanford C. Bernstein is among the most bearish with a price target of $112, which is 12 percent below where the stock currently trades.
1. CME Group
Company Profile: CME Group is a derivatives marketplace offering a range of benchmark futures and options products.
Average Return Since 2003: 10 percent
Best September Performance: +21.7 percent in 2005
Worst September Performance: -2 percent in 2003
Analysts Ratings: CME Group gets positive marks from analysts, raking in 14 "buy" ratings from firms such as Jefferies and BMO Capital.
Another seven analysts say investors should hold onto shares, while one analysts recommends selling the stock. The average price target of $341.12 represents potential upside of 28 percent from current levels.
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