According to CFRA, September has been the worst month for the S&P500 on average since 1945. According to CFRA, the index has been positive in September only 45 percent of the time since World War II.
This month, the S&P500 is down 0.4 percent.
Analysts identified the last five Septembers in which the S&P500 fell. We then identified the stocks that consistently outperformed the S&P500 during those down months. Finally, we sorted the stocks based on their average September movement.
Analysts search yielded a number of classic defensive names — stocks that tend to be stable regardless of how the market performs overall. Utilities, health care, and consumer staples are typically classified as defensive sectors by market strategists.
Duke Energy, a utility stock, took the top spot on the list. Duke Energy gained 3.8 percent on average during the previous five down Septembers.
During the previous five negative Septembers, Eli Lilly rose 1% and UnitedHealth Group fell 0.1 percent on average. According to FactSet data, the two health-care stocks are also well-liked on Wall Street: 57.9 percent of analysts covering Eli Lilly have buy ratings on the stock, while 80.8 percent of those covering UnitedHealth recommend buying the name.
Consumer staples are also prominently featured on the list. Procter & Gamble, Walmart, and PepsiCo are all represented on the screen. Procter & Gamble has the best track record of the three, with an average 1 percent gain over the previous five down Septembers. Walmart is the most popular stock on Wall Street, with 56.8 percent of analysts covering it recommending a buy.
Dependable regional bank PNC has also outperformed the market during the last five negative Septembers, with a 1.2 percent average drop during those months. As of midday Wednesday, the stock had gained 0.9%.
Other stocks that aren’t typically thought of as defensive names are technology stocks Intel, Texas Instruments, and IBM.
Macy upgraded to outperform
This year, Macy’s stock has outperformed the broader market, rising more than 88 percent. However, the stock has struggled in the long run and is currently trading near the same level as it did in August 2019.
In addition to the long-term turnaround, Cowen anticipates Macy’s outperformance in the coming quarters.
“We expect higher revenue growth to translate to expense leverage, and we believe a beat-and-raise scenario is likely given the bar for 2H21 app,” according to the note.
Cowen increased its price target on Macy’s from $23 to $27 per share. Following the upgrade, Macy’s shares were up nearly 2% in premarket trading on Thursday.
Singapore banks value
“I think generally we’re far more comfortable with Singapore banks,” Young said, when asked about his outlook on Chinese and Singaporean banks.
According to Young, because the Chinese government controls the financial system, banks can be asked to lend to key industries for non-commercial reasons.
Singapore banks, on the other hand, are run “very commercially” and regulated by “very strong” authorities that enforce clear rules and require lenders to hold adequate reserves, he added.
For the first time since 1999, Bank of America’s reliable model predicts negative long-term returns.
September has a blemished track record. When the going gets tough this month, these stocks will fare well.
“In general, I would keep banking in China light,” said the veteran fund manager.
“We actually like Singapore banks and have far more exposure to Singapore banks in our portfolios than we do to Chinese banks,” Young said.
He went on to say that his firm’s portfolios include “chunky holdings” in the two largest Singapore-listed banks, DBS Group Holdings and Oversea-Chinese Banking Corp.
The performance of stocks
DBS and OCBC shares have risen 20.1 percent and 15.1 percent, respectively, this year. United Overseas Bank, a smaller competitor, has risen 12.7 percent. All three banks outperform the benchmark Straits Times Index, which is up 7.9 percent this year.
Meanwhile, three of China’s big four banks’ Hong Kong-listed shares have lost money this year. The Industrial and Commercial Bank of China fell 11.7 percent, while the China Construction Bank and the Agricultural Bank of China fell 3.7 and 3.9 percent, respectively.
Bank of China is the only large Chinese lender that has increased year to date, gaining approximately 4.2 percent as of Wednesday.
Despite the recent surge in Singapore bank share prices, Young stated that he would still buy the stocks at current levels.
“Most importantly, as an agnostic aircraft user, Blade’s model is not dependent on the success of any one or a few [electric vertical aircraft] companies. “Blade may emerge as the leader of what can be considered ‘ride-sharing in the skies,’ similar to Uber and Lyft on the ground, in what is likely to become a massive market over time,” according to the note.
According to the firm, the total market for the industry could be in the tens of billions of dollars within a decade.
In addition to having a first-mover advantage in the space, the company has cost and industry direction flexibility, which should allow it to grow more easily, according to JPMorgan.
“Blade acquires capacity on a pay-as-you-go basis from third-party aircraft owner operators. This makes the business model capital light and the cost structure largely variable, allowing Blade route services to be profitable even at low volumes, according to the note.
Credit Suisse’s favorite stocks
Credit Suisse identified 36 top outperform ideas, the majority of which are in the consumer, health care and technology, media, and telecommunications sectors. The list is based on the No. 1 pick of each of the firm’s analysts over a six- to 12-month time horizon.
Among its “top of the crop” ideas are Caterpillar, Amazon, and Teck Resources. That is, these are names with high conviction that also have the “least demanding” market expectations.
New to the list are financial services firm Square, oat milk company Oatly, biopharma company Acceleron, and oil and gas firm Kimbell Royalty Partners.
According to Square analyst Timothy Chiodo, the company has continued to execute on its long-term strategy while still delivering strong near-term results, citing the speed of its product rollouts, mergers and acquisitions, and expansion into other verticals beyond payments. According to him, the company is poised for at least 20% top-line growth. Its price target is $300, according to the firm.
Oatly shares are currently trading below the $17 IPO offering price, but Credit Suisse sees this as an opportunity. The company sees several megatrends that will drive growth in the plant-based food industry and is drawn to its brand strength, expansion plans, and diversification beyond the core oat milk offering.
The firm’s Amazon price target is $4,700. It stated that consumers’ willingness to order online is “becoming more every day versus every now and then,” which could lead to an increase in gross merchandise value estimates in 2021 and beyond, as well as lower customer acquisition and retention costs.
Cooperman revealed that his most important position is in energy. He named his top picks in the industry.
“My strongest position is a very contrarian viewpoint,” Cooperman explained. “I started the year with excess energy and am now even more so. I take a look at the current natural gas situation. Storage levels are far below historical norms, and natural gas prices have risen dramatically.”
Due to extreme weather, increased exports, and lower production, natural gas prices have reached their highest levels since early 2014. The energy sector is one of the best-performing industries in 2021, up nearly 25% on the back of the pandemic’s economic reopening.
Cooperman said he owns stock in seven or eight natural gas companies that are “coining money now, generating enormous amounts of free cash flow, paying down debt, paying out big dividends, and buying back stock.”
He named two Canadian companies as his favorites: Tourmaline Oil and Paramount Resources. Devon Energy, Energy Transfer, and Pioneer Natural Resources were also mentioned.
“We are currently experiencing a period of tightening supply and demand for energy. “You could buy these companies for three or four times the cash flow from stock repurchase debt repayments,” Cooperman explained.
He also believes there is value in Citigroup, Signature Bank, and Pfizer, as well as some Big Tech stocks such as Google, Amazon, Microsoft, and Facebook.
Cooperman, however, remains cautious on the market in the long run, believing that the unprecedented stimulus has pushed demand forward and created an artificial situation in the economy.
“Because the market structure is broken, when there is a fundamental reason for the market to fall,… it will fall so quickly that heads will spin. There are currently no market stabilizing forces. “Everything is run by machines,” Cooperman explained.
He also stated that he is closely monitoring the Federal Reserve’s speeches, inflation, gold, bitcoin, the dollar, and overall interest rates for signals.
Cooperman also stated that bonds are “completely overpriced.” He stated that the benchmark Treasury yield has historically traded in line with nominal GDP, but it was trading around 1.34 percent on Thursday, significantly lagging the economy’s 6.5 percent expansion rate.