By the time you’re reading this we’ll be into post-Labor Day trading. Your mind has been tainted by numerous headlines letting you know that September has been, statistically, the worst month of the year for stocks over the last half century.
That Wall Street Journal headline certainly wouldn’t get people in the mood to commit new funds to stocks. Neither would the Journal’s Aug. 28 Money Beat segment detailing a 10-week stretch when mutual fund investors yanked over $30 billion out of mutual funds and ETFs.
That was the longest continuous period of net weekly redemptions since 2004.
It wasn’t just the Wall Street Journal that was spewing fear about September. On Aug. 31 Bespoke Investment Group showed the chart below.
Septembers were the runaway winners in garnering negative results over the past half century. Augusts were the only months with negative returns, and that was just minus 2% versus (-29%) in the following 30 days.
Octobers have hosted many famous crashes, but they’ve proven to be solid winners by month ends. Novembers and Decembers are traditionally strong.
Those are all facts. How can you make that knowledge work for you?
First off, ask yourself what actually happened after the previous huge mutual redemption spree that ended in 2004.
Forward thinkers saw it was a great opportunity to buy rather than sell. The Standard & Poor's 500 was about to surge better than 33% over the next 16 months.
By definition stocks offer better value after declines. If Septembers are notoriously bad, then putting money to work during selloffs would make sense. Why wait for the coming higher entry points of October through December when prices are likely to be more expensive?
Perhaps investors are beginning to smarten up. The market’s recent recovery made them brave enough to tiptoe back into equity funds to the tune of $300 million last week, breaking this year’s negative money-flow streak.
Traders bold enough to buy during September might find value in the five names below. I’ve been buying or adding to each of them in recent days. They are healthy, profitable companies that operate in nicely diverse industry groups.
Sept. 5’s 234-point DJIA selloff left Chico's at $8.01, Stericycle at $70.34, Sabre at $17.84, Fluor at $38.34 and NCI at $15.28. They offer outstanding value.
Fluor, Sabre and Chico’s even offer decent yields while you wait for what seems to be very significant upside.
Disclosure: Long Chico's, Stericycle, Sabre, Fluor and NCI shares. Short Chico's, Stericycle, Sabre, Fluor and NCI options.