The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.
While returns average 6.93% for the rest of the year, the months from May through October have only averaged a sluggish 1.61% rate over the last 50 years. Because of this long-standing trend, investors typically follow the advice to “sell in May and go away.”
At Schaeffer Investment Research, we’ve found that this can actually create some of the best opportunities to find great deals on high-performing stocks. In our latest report, we dig deeper into what’s behind this 50-year trend of sluggish summer returns and give you five stock picks to take advantage of this prime buying opportunity.
What’s Behind the Summer Slowdown?
According to our research, when investors are especially bullish in April, returns are most likely to experience a sharp drop in the summer. In years when more than 50% of investors are bullish, the S&P 500 averaged a 0.42% loss between May and October.
That’s not the full picture, though. The market beat this trend in years where it closes in April near its all-time high. When the index is within 3% of its all-time high, returns have tended to hold strong through the summer, averaging 5.19%.
The influence of this second factor was so strong, in fact, that even in years when over 50% of investors were bullish, the market maintained healthy performance through the summer. So, the index seems to experience the worst declines when investor bullishness outpaces actual market performance.
Which Stocks Should Be On Your Radar This Summer?
Despite being at the beginning of what is historically the slowest time frame for the stock market, Schaeffer’s Investment Research has identified 5 stocks that are poised to buck the trend and enjoy strong growth this summer.
Here are our top 5:
Chegg CHGG - Education technology platform
Expedia (EXPE) - Travel booking agency
Molson CoorsBeverage (TAP) - Alcohol giant
Sonos (SONO) - Speakers
X - United States Steel
From tech through to the materials sector, the stocks we are most bullish about this summer are ones that have a history of bucking the summer slowdown trend for multiple years, healthy short interest, and key technical indicators that suggest the stock has room to grow.
Our analysis also looked at potential partnerships, policy changes, and other news anticipated this summer to find the stocks with a strong short interest that are most likely to experience a price breakout that could force short positions to cover quickly.
The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.
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