Sweet stocks to own until December
Investors expect big gains at the end of the year. But only a few stocks actually perennially deliver on the dream.
There are 23 stocks in the Standard & Poor's 500, including drugmaker Mylan (MYL), Monster Beverage (MNST) and Vulcan Materials (VMC), that have beaten the market in November and December every year for the past five years, according to a USA TODAY analysis of data from S&P Global Market Intelligence. And 13 of these stocks have also delivered at least 6% average gains during the final two months of the year since 2011.
November and December are two of investors' favorite months for good reason. December is the year's best month, with an average long-term gain of 1.7%. November is No. 2, with an average 1.5% gain, says Stock Trader's Almanac. Any gains would be more than welcome for investors who suffered through a 1.9% decline in October, the month some investors consider to be jinxed.
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However, despite the happy history, this time around many investors are bracing for the worst. Gains for the end of this year could be a bit iffy given that the Federal Reserve appears poised to boost short-term interest rates and the election introduces a big variable. Some investors might question whether stocks might not get their usual year-end lift.
"The U.S. economy appears stable, propelled by labor market strength, inventory rebuilding and strong housing market activity," says Omar Aguilar, chief investment officer of equities at Charles Schwab Investment Management. "However, a slowdown in consumer confidence and sluggish business expenditures could affect growth in the first half of 2017."
Some stocks have broken through November concerns before. Mylan, the drugmaker under fire this year over price hikes for its allergy drug EpiPen, has seen its shares lose nearly a third of their value this year. Lawmakers have grilled the company raising the threat of regulation, and investors worry, too, about how a new president could affect the industry. But Mylan tends to be a stellar late-year stock performer. During November and December last year, for instance, shares rose 22.6%, which topped the 1.7% decline by the S&P 500 during the same months. Mylan, on average, has gained 12.1% during November and December the past five years.
Monster Beverage, a maker of energy drinks, gets revved up at the end of the year, too. The stock, on average, has gained 11.4% in November and December the past five years. Monster's shares are down 3.6% this year to $143.84, but analysts are bullish, saying they could be worth $173.47 in 18 months. The company's shares are typically strong at year's end as investors position for strong consumer spending, says John Staszak, analyst at Argus Research. "I am expecting good things again from Monster Beverage this 4Q," he says.
Not all the year-end winners make recognizable products. Vulcan sells asphalt and concrete mixes. That might not be all that exciting, but the stock's 11% average gain during November and December has been. Vulcan shares tend to be strong as the year winds down because investors are jumping in ahead of the beginning of the construction season in the early spring, says Stanley Elliott, analyst at Stifel. "It’s also about the time where various economists/trade groups start framing out expectations for the following year," he says.
There's no guarantee these stocks will always generate big gains. Last year, for instance, the S&P 500's 1.7% decline was a notable exception to the year-end rally. Vulcan's shares also sank 1.67% last November and December. Although that marginally beat the S&P 500, it's hardly a stellar performance. But investors still look for good things at year's end. "Vulcan’s business has high barriers to entry, good levels of profitability and incremental margins, and pricing power so if the outlook for next year is favorable the company should outperform," Elliott says.
