13 stocks that dodge August pain
Simply getting through August unscathed would please most investors. But there have been ways to thrive during the cruel month for stocks.
There are 13 stocks in the Standard & Poor's 500, including car parts seller Advance Auto Parts (AAP), entertainment giant 21st Century Fox (FOXA) and utility FirstEnergy (FE), that have consistently beaten the August slows. Each of these stocks have topped the S&P 500 during each of the past five months of August, according to a USA TODAY analysis of data from S&P Capital IQ.
Finding stocks that have actually performed well during the late summer isn't easy. The S&P 500 has dropped an average of 2.4% during the past five Augusts — not exactly a ringing endorsement of the month. It's just not a great time for stocks. The market has dropped in four of the past five months of August. The exception was August 2014, when the market rose 3.8%.
Longer term, August isn't all that much better. August is just one of four months that have posted average losses dating to 1950, says The Stock Trader's Almanac.
That's why investors might want to know the types of stocks that have withstood the test of August the best. It's a month that investors get decidedly defensive or focused on the last throes of summer. Not one of the consistent August winners hail from the volatile technology sector or the cyclical industrial sector.
Of the 13 stocks to buck the August downturn, four are in the consumer discretionary sector. Two of those August-beating consumer discretionary stocks are auto parts sellers, including Advance Auto Parts and O'Reilly Automotive (ORLY). Analysts are rather bullish about O'Reilly's profit during the third quarter. They're calling for the company to deliver an adjusted third-quarter profit of $2.34 a share during the period, which would be the largest quarterly profit for it this year. Advance and O'Reilly have gained 4.1% and 1.6%, respectively, during the past five Augusts. Those gains won't blow most investors away, but remember that August is just about not getting burned.
It's easier to see the summer connection with some of the other August winners, especially 21st Century Fox. Summer movies are on investors' minds, and many might try to get into the shares to capitalize from any box-office scores. The summer's Fantastic Four is set for release on Aug. 7 by 21st Century Fox, followed up by Hitman: Agent 47 on Aug. 21. The movie-maker's shares have risen 3.8% over the past five Augusts on average.
But given August's bad reputation with investors, it's not surprising investors look to hunker down a bit. Three of the 13 best summer performers are utilities stocks, which are known for being stable and good dividend payers. Take FirstEnergy, which has gained 3.4% over the previous four Augusts. Here's the part investors really like, though: a 4.4% current dividend yield. With income like that, investors are willing to put up with some August volatility.
If August is any guide — it's understandable for investors to brace for losses. But there are patterns to the month that might give investors a hand getting through the rocky month.