In this piece, we will take a look at the 12 best seasonal stocks to buy now. If you want to skip our overview of seasonal investing and some recent stock market news, then take a look at 5 Best Seasonal Stocks To Buy Now.
Seasonality and cyclicality are unavoidable parts of the climate, the economy, and business operations. Just like summers and winters regularly take place each year, an economy undergoes periods of economic growth and economic contraction. Similarly, businesses are often limited to selling their products in certain months, and this ends up affecting their supply chain as well.
One of the strongest examples of seasonal revenue is Apple Inc. (NASDAQ:AAPL). Apple's fiscal year ends in September, and the month is also central to the firm's business cycle. Apple regularly upgrades its iPhone in September, and October marks the start of its first quarter. Naturally, sales of the iPhone are highest when the smartphone is launched, and Apple's revenue is the highest during Q1 as well. This cyclical nature also translates downstream into Apple's supply chain in the form of orders made to build the iPhone.
Before Apple's first fiscal quarter, orders made to companies such as the Taiwan Semiconductor Manufacturing Company (NYSE:TSM) pick up during the quarter ending in September and they slow down during a year's first calendar quarter after the U.S. technology giant has finished making most of the orders for its latest products. Looking at the firm's latest revenue figures. its first quarter of fiscal year 2023 revenue stood at $117 billion and went on to drop to $94 billion, $81 billion, and $89 billion during the succeeding quarters, respectively.
The next question to ask after keeping this seasonality in mind is if it affects stock performance. After all, if some quarters consistently see higher revenues, then one might also imagine that the stock price gains more during these time periods. Well, data compiled by the analytics platform Tradewell shows that October is the best month to buy Apple's shares as they historically return 5.35% on average. For a three month period, the months between November and February see the stock post the most returns, sitting at 8.67%. Likewise, the three months between May and August are the worst months for the shares. Comparing these figures with the nature of Apple's business shows that the business cycle does appear to create short term opportunities for stock market profit taking.
Similar perturbations are also present in the economy as we alluded to above. These come in the form of cyclicality, a data pattern that is similar to seasonality. The difference between seasonality and cyclicality is that seasonal patterns follow a set time period (like the summer months or Apple's quarterly revenue) while cyclical patterns are not time constrained. What this means is that an economy can show peak growth and peak drops over any time period, whether it's one month or one year - with the only certainty being that these extreme highs and lows will take place.
Coming back to the stock market, seasonality is one of the most favorite topics in academia, with researchers consistently studying any factor that could influence share price returns. One such research paper comes from the Ivey Business School of the University of Western Ontario. It analyzed value and growth stock performance of equities listed on the NYSE, NASDAQ, and AMEX (now NYSE American) stock exchanges to discover that not only is seasonality present across returns generated by both value and growth stocks, but also that they exhibit different seasonal patterns.
The researchers concluded:
The paper finds that both value and growth stocks exhibit seasonal strength in January and the first half of the year, but the effect is stronger for the value stocks. In the second half of the year, however, the opposite is true. Growth stocks exhibit weaker performance than value stocks. Seasonality is also observed in the value premium, which exhibits peak seasonal strength in the June to July period for NASDAQ and NYSE and relative seasonal weakness in the remaining months of the year. AMEX stocks, on the other hand, exhibit seasonal strength in the first seven months of the year and seasonal weakness thereafter, with AMEX value premium turning negative, which is unlike the NYSE and NASDAQ value premiums that always remain positive. While the findings are, in general, consistent with the January seasonal strength of value stocks found by Loughran (1997), there is no evidence that NASDAQ stocks drive the results. The findings, which are pervasive across all markets examined, are consistent with the gamesmanship hypothesis and portfolio rebalancing by professional portfolio managers. However, they are not consistent with the argument that it may be higher risk that drives the outperformance of value stocks. This is because while portfolio managers seem to rebalance aggressively into value stocks at the beginning of the year, they switch out of growth stocks more aggressively in the second half of the year (which they would not do if growth stocks had lower risk than value stocks), thus negating the argument that value stocks bear more risk that growth stocks.
To compile our list of the best seasonal stocks, we ranked the constituent stocks of all stock ETFs part of the Horizons Seasonal Rotation ETF by the number of hedge funds that had bought their shares in Q3 2023 and picked out the top seasonal stocks.
Best Seasonal Stocks To Buy Now
12. Linde plc (NASDAQ:LIN)
Number of Hedge Fund Investors In Q3 2023: 71
Linde plc (NASDAQ:LIN) is an industrial grade gas provider headquartered in Woking, the United Kingdom. The firm has been doing well on the financial front as of late since it has beaten analyst EPS estimates in all four of its latest quarter. Linde plc (NASDAQ:LIN)'s third quarter saw its Americas revenue grow by 10% annually, and the firm also shared that it had $4.5 billion of products in its backlog.
During this year's September quarter, 71 out of the 910 hedge funds part of Insider Monkey's database had held a stake in Linde plc (NASDAQ:LIN). Alexander Mitchell's Scopus Asset Management owned the largest stake among these which was worth $19.3 million.
Linde plc (NASDAQ:LIN) joins Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA) in our list of the best seasonal stocks to buy.
11. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Investors In Q3 2023: 73
Freeport-McMoRan Inc. (NYSE:FCX) is a copper mining company headquartered in Phoenix, Arizona. It was at the center of a bit of a drama in November 2023, when management recommended to shareholders that they reject a bid for the firm's shares that was below its market share price.
By the end of Q3 2023, 73 out of the 910 hedge funds profiled by Insider Monkey had invested in the company. Freeport-McMoRan Inc. (NYSE:FCX)'s biggest hedge fund investor is Ken Fisher's Fisher Asset Management as it owns 54 million shares that are worth $2 billion.
10. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Investors In Q3 2023: 76
The Home Depot, Inc. (NYSE:HD) is an American home improvement products retailer. The firm is embroiled in a political controversy these days, after calls to boycott its stores intensified following The Home Depot, Inc. (NYSE:HD)'s co-founder's support for former U.S. President Donald J. Trump.
Insider Monkey took a look at 910 hedge fund portfolios for their third quarter of 2023 investments and found that 76 were The Home Depot, Inc. (NYSE:HD)'s shareholders. Out of these, the largest shareholder was Ken Fisher's Fisher Asset Management due to its $2.6 billion stake.
9. General Electric Company (NYSE:GE)
Number of Hedge Fund Investors In Q3 2023: 76
General Electric Company (NYSE:GE) is an industrial products provider known for its power generation products. More than three quarters of its stock is owned by institutional investors, indicating that the shares can remain stable for a long period or rapidly drop in the blink of an eye.
Insider Monkey's survey of 910 hedge funds for their Q3 2023 shareholdings revealed that 76 had bought the firm's shares. General Electric Company (NYSE:GE)'s biggest stakeholder in our database is Chris Hohn's TCI Fund Management since it owns $4.6 billion worth of shares.
8. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Investors In Q3 2023: 81
Tesla, Inc. (NASDAQ:TSLA) is the biggest electric vehicle retailer in the world. Q4 2023 is turning out to be an important month for the firm, as it is gearing up for the highly anticipated launch of its EV truck, Cybertruck.
During September 2023, 81 out of the 910 hedge funds part of Insider Monkey's database had invested in Tesla, Inc. (NASDAQ:TSLA). Catherine D. Wood's ARK Investment Management was the largest investor through its $1 billion investment.
7. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Investors In Q3 2023: 87
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor company that designs and sells connectivity and associated products. Not only has it beaten analyst EPS estimates in all four of its latest quarters, but analysts have also set a roughly $64 upside based on the average share price target of $1,009.
For their third quarter of 2023 investments, 87 out of the 910 hedge funds tracked by Insider Monkey had owned the firm's shares. Broadcom Inc. (NASDAQ:AVGO)'s biggest stakeholder is Ken Fisher's Fisher Asset Management since it owns 2 million shares that are worth $1.7 billion.
6. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Investors In Q3 2023: 90
Union Pacific Corporation (NYSEUNP) is an American railroad company headquartered in Omaha, Nebraska. November 2023 has turned out to be a striking month for the firm as Federal inspectors have discovered hundreds of defects in its rail yard in Nebraska.
During Q3 2023, 90 out of the 910 hedge funds polled by Insider Monkey had held a stake in Union Pacific Corporation (NYSE:UNP). Eric W. Mandelblatt's Soroban Capital Partners was the largest investor among these courtesy of its $1.6 billion investment.
Amazon.com, Inc. (NASDAQ:AMZN), Union Pacific Corporation (NYSEUNP), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation (NASDAQ:NVDA) are some top seasonal stocks that hedge funds are buying.
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Disclosure: None. 12 Best Seasonal Stocks To Buy Now is originally published on Insider Monkey.