In July 2017, the large-cap stocks in the US stock market melted to new record highs, and in August, the trend is looking to go the same way. However, now sentiment is white hot, with risks to investors rising and their positioning is extreme with low cash levels, what with August and September being (historically proven to be) the worst two months for equities. For instance, the S&P 500 index has fallen 0.1-0.7% on an average during these two months since the year 1980 – and both the months remain the only ones which show a negative return.
However, if one looks past all this, investors need to turn to the defensive areas of the stock market that have proven to perform well during this time on a historical basis. These top 5 stocks to buy now are steady, focused equities that have historically performed well during August-September.
Nike (NYSE: NKE)
A season of solid earnings has propelled Nike’s stock to rise close to 18% since their lows in May-June, which have now successfully stretched over even its March highs as well as the $59.56 August 2016 high. Currently, prices are at levels which were last observed in April 2016, and the likelihood of the stock hitting its December 2015’s all-time high of $66.95 is quite reasonable. With back-to-school shopping beginning soon and the fall sports season coming up, seasonality will kick into high gear going ahead. Expected earnings from the September earnings update are looking to be as high as 49 cents per share. This outlook is keeping in mind the whopping June results reported by the company, when the profits of 60 cents per share exceeded the earnings guesstimates by 10 cents, with the revenues rising an equally impressive 7%. With many analyst firms updating and upgrading their price targets, Nike is definitely amongst the top 5 stocks to buy now.
The general off-putting atmosphere of unpleasantness in the retail space due to the news that the consumer is pulling back – both for big-box stores as well as specialty retailers is not putting off the stocks of Wal-Mart Stores Inc. which seems to be enjoying success. Since July, growth in retail sales has rolled over sharply and has slowed down quite a bit due to fall in real disposable income. However, Wal-Mart seems to be thriving and even enjoying this price-sensitive environment, with shareholders testing high-limits of $81/share for the first time since February 2015, and the stock could also hit the all-time January 2015 high of $84.82. The August earnings exceeded the expected $1.07 earnings per share and sat squarely at $1.08 (adjusted). Since Wal-Mart falls in the consumer staples category with some unique competitive advantages, seasonality is only going to help Wal-Mart moving forward into the period of April-November.
Barrick Gold (ABX)
Currently, the focus is on stocks that are coming back to life, especially the gold mining stocks such as the Barrick Gold Corporation. Amidst the recent weakness spree of the US dollar, and for the first time since April, prices are being pushed again above the 200-day moving averages. Currently trading at around $16.86, the Barrick Gold Corporation is breaking free of smaller, 5-month-long trading range, after having been mired in a 2-year-long consolidation range. The expected run in February/April highs of $20, which is a 20% increase from current levels. Barrick beat estimates in its July earnings – it exhibited revenues of 22 cents per share, exceeding estimates of 17 cents per share. The October earnings are expected to be 19 cents per share. The recommended action for investors is going long.
New Gold (NGD)
Tailwinds are hitting the stock of New Gold Inc., which has resulted in the prices of the shares pushing above the 200-day moving average for the 1st time since January 2017. This appears to be the start of the culmination of the 2-year-long downtrend that the stock suffered, down from a high of $6.04. The stock now faces the challenge of increasing, maybe even doubling, from here on – however, it is backed by the seasonal tailwinds that gold prices enjoy between the months of late July and early October. New Gold’s July earnings of 2 cents/share beat estimates by one penny and October earnings are expected to be breakeven.
Golden Star Resources (GSS)
Golden Star Resources Ltd. is a hot-on-the-trail penny stock, trading for less than $1/share and is more of a speculative nature. However, the stock appears to be ready to make a run for its February high of $1.4/share, which is nearly a whopping 50% increase from its current levels. What helps is that Golden Star Resources is already far better off as compared to its 2015 low of 14 cents/share. The stock’s August earnings were a profit of 4 cents/share, up from a loss of 8 cents/share in August 2016.