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5 Stocks to Avoid in the Market's Typically Worst Month
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They say “History Repeats Itself” and one of the historic realities of the equity market has been its relatively poor performance in the month of September. Statistics reveal that since 1950, the Dow Jones Industrial Average and S&P 500 index declined 1.1% and 0.7%, respectively, on an average in September, while Nasdaq witnessed an average decline of 1% since it was first established in 1971.
Should alarm bells start ringing now as we step in to this dreaded month? Does the unprecedented 89-month Bull Run of the equity market, with shares trading near all-time highs, represent a lull before the storm? Let us dig a little deeper to find out what could potentially shake the financial markets this month.
Key Events Scheduled for the Month
The U.S. Presidential election race has heated up with Republican Donald Trump and Democrat Hillary Clinton trying to outwit each other through arguments and counter-arguments. The first debate between both the candidates is scheduled on Sep 26. Election-related uncertainty casts a shadow on the equity markets and is widely expected to create volatility until a clearer picture of the economic policies of the potential winner emerges.
The Fed is slated to meet on Sep 20 and Sep 21 to deliberate on raising interest rates. Speculation is rife that the Fed could be forced to give a green signal to its rate hike decision if the August employment report due to be released on Sep 2 come in ahead of the expected 180,000 nonfarm payrolls. The ambiguity in decision-making process is likely to create investor panic and could send the stock market in a tizzy.
The Bank of England is scheduled to meet on Sep 15 to decide on policies related to quantitative easing for its smooth exit from the European Union. The Bank of Japan will have its policy meeting on Sep 20 and Sep 21 to deliberate on matters to jumpstart its economy. Bank of Japan’s Governor Haruhiko Kuroda had already hinted at fine tuning his three-pronged strategy of asset buying, monetary-base guidance and negative interest rates to revive economic growth.
In addition to the central banks meeting, the proposed meeting of G-20 leaders in China on Sep 4 and Sep 5 are likely to pass a resolution against engaging in competitive devaluations to avoid any macroeconomic repercussions. If the outcome of all these meetings is below expectations, it could send a ripple effect across global equity markets, including the U.S.
The OPEC and non-OPEC members are slated to meet in Algeria on Sep 26–28 to decide on their future course of action. Crude oil prices are likely to be strained as refiners take operations off line for seasonal maintenance ahead of winter fuel production. However, if OPEC producers freeze production and some non-OPEC producers continue to pump record amounts of oil, prices could decline to less than the psychological barrier of $40 per barrel. This could send stocks, which are sensitive to oil prices, to a free fall.
Shun These Stocks
Amid such adversaries, investors should be better off if they avoid some stocks that have the combination of a Zacks Rank #5 and a VGM Score of ‘F’.
Bristow Group, Inc. : Headquartered in Houston, TX, Bristow is a leading provider of helicopter services for major transportation operations in the U.S., Gulf of Mexico and the North Sea, and other major offshore oil and gas producing regions of the world, including Alaska, Australia, Brazil, Mexico, Nigeria, Russia and Trinidad. The company reported an average negative earnings surprise of 438.7% in the trailing four quarters. Its current quarter estimate has plummeted by a staggering 1283.3% to a loss of 28 cents.
Liberty LiLAC Group (LILA - Free Report) : Operating as a cable firm, Liberty LiLAC offers video, broadband Internet, fixed-line telephony and mobile services primarily in Europe, Chile, Puerto Rico and internationally. The company posted a negative average earnings surprise of 437.1% in the trailing four quarters. Its current quarter estimate has declined by 115.2% to a loss of 7 cents.
Altisource Residential Corporation : Based in Christiansted, VI, Altisource is engaged in the acquisition and ownership of single-family rental assets. The company reported an average negative earnings surprise of 248.1% in the trailing four quarters. Its current quarter estimate has declined by 341.5% to a loss of 99 cents.
Sharps Compliance Corp. : Based in Houston, TX, Sharps Compliance is a leading provider of cost-effective disposal solutions of medical waste such as hypodermic needles, lancets and any other medical device or objects used to puncture or lacerate the skin. The company posted an average negative earnings surprise of 194.3% in the trailing four quarters. Its current quarter estimate has declined by 64.7% to 2 cents.
Arctic Cat Inc. : Headquartered in Minneapolis, MN, manufactures and markets snowmobiles and all-terrain vehicles as well as related parts, garments and accessories throughout the contiguous U.S. and Canada, and through distributors representing dealers in Alaska, Europe, the Middle East, Asia and other international markets. The company delivered an average earnings surprise of a negative 93.6% in the trailing four quarters. Its current quarter estimate has declined by 15.5% to 35 cents.
Moving Forward
Sameer Samana, global quantitative analyst at Wells Fargo Investment Institute, observed, "We've seen a lot of flows into the riskier parts of the market. We saw flows into high yield, emerging markets debt, emerging market equities. ... There's been this huge reach for yield. ... What's more worrisome to us is how everyone is leaning on the same side of the boat." As the equity markets brace for some key events in September that has an awful performance history, investors should be better off if they avoid these stocks in the near term.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>
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5 Stocks to Avoid in the Market's Typically Worst Month
They say “History Repeats Itself” and one of the historic realities of the equity market has been its relatively poor performance in the month of September. Statistics reveal that since 1950, the Dow Jones Industrial Average and S&P 500 index declined 1.1% and 0.7%, respectively, on an average in September, while Nasdaq witnessed an average decline of 1% since it was first established in 1971.
Should alarm bells start ringing now as we step in to this dreaded month? Does the unprecedented 89-month Bull Run of the equity market, with shares trading near all-time highs, represent a lull before the storm? Let us dig a little deeper to find out what could potentially shake the financial markets this month.
Key Events Scheduled for the Month
The U.S. Presidential election race has heated up with Republican Donald Trump and Democrat Hillary Clinton trying to outwit each other through arguments and counter-arguments. The first debate between both the candidates is scheduled on Sep 26. Election-related uncertainty casts a shadow on the equity markets and is widely expected to create volatility until a clearer picture of the economic policies of the potential winner emerges.
The Fed is slated to meet on Sep 20 and Sep 21 to deliberate on raising interest rates. Speculation is rife that the Fed could be forced to give a green signal to its rate hike decision if the August employment report due to be released on Sep 2 come in ahead of the expected 180,000 nonfarm payrolls. The ambiguity in decision-making process is likely to create investor panic and could send the stock market in a tizzy.
The Bank of England is scheduled to meet on Sep 15 to decide on policies related to quantitative easing for its smooth exit from the European Union. The Bank of Japan will have its policy meeting on Sep 20 and Sep 21 to deliberate on matters to jumpstart its economy. Bank of Japan’s Governor Haruhiko Kuroda had already hinted at fine tuning his three-pronged strategy of asset buying, monetary-base guidance and negative interest rates to revive economic growth.
In addition to the central banks meeting, the proposed meeting of G-20 leaders in China on Sep 4 and Sep 5 are likely to pass a resolution against engaging in competitive devaluations to avoid any macroeconomic repercussions. If the outcome of all these meetings is below expectations, it could send a ripple effect across global equity markets, including the U.S.
The OPEC and non-OPEC members are slated to meet in Algeria on Sep 26–28 to decide on their future course of action. Crude oil prices are likely to be strained as refiners take operations off line for seasonal maintenance ahead of winter fuel production. However, if OPEC producers freeze production and some non-OPEC producers continue to pump record amounts of oil, prices could decline to less than the psychological barrier of $40 per barrel. This could send stocks, which are sensitive to oil prices, to a free fall.
Shun These Stocks
Amid such adversaries, investors should be better off if they avoid some stocks that have the combination of a Zacks Rank #5 and a VGM Score of ‘F’.
Bristow Group, Inc. : Headquartered in Houston, TX, Bristow is a leading provider of helicopter services for major transportation operations in the U.S., Gulf of Mexico and the North Sea, and other major offshore oil and gas producing regions of the world, including Alaska, Australia, Brazil, Mexico, Nigeria, Russia and Trinidad. The company reported an average negative earnings surprise of 438.7% in the trailing four quarters. Its current quarter estimate has plummeted by a staggering 1283.3% to a loss of 28 cents.
Liberty LiLAC Group (LILA - Free Report) : Operating as a cable firm, Liberty LiLAC offers video, broadband Internet, fixed-line telephony and mobile services primarily in Europe, Chile, Puerto Rico and internationally. The company posted a negative average earnings surprise of 437.1% in the trailing four quarters. Its current quarter estimate has declined by 115.2% to a loss of 7 cents.
Altisource Residential Corporation : Based in Christiansted, VI, Altisource is engaged in the acquisition and ownership of single-family rental assets. The company reported an average negative earnings surprise of 248.1% in the trailing four quarters. Its current quarter estimate has declined by 341.5% to a loss of 99 cents.
Sharps Compliance Corp. : Based in Houston, TX, Sharps Compliance is a leading provider of cost-effective disposal solutions of medical waste such as hypodermic needles, lancets and any other medical device or objects used to puncture or lacerate the skin. The company posted an average negative earnings surprise of 194.3% in the trailing four quarters. Its current quarter estimate has declined by 64.7% to 2 cents.
Arctic Cat Inc. : Headquartered in Minneapolis, MN, manufactures and markets snowmobiles and all-terrain vehicles as well as related parts, garments and accessories throughout the contiguous U.S. and Canada, and through distributors representing dealers in Alaska, Europe, the Middle East, Asia and other international markets. The company delivered an average earnings surprise of a negative 93.6% in the trailing four quarters. Its current quarter estimate has declined by 15.5% to 35 cents.
Moving Forward
Sameer Samana, global quantitative analyst at Wells Fargo Investment Institute, observed, "We've seen a lot of flows into the riskier parts of the market. We saw flows into high yield, emerging markets debt, emerging market equities. ... There's been this huge reach for yield. ... What's more worrisome to us is how everyone is leaning on the same side of the boat." As the equity markets brace for some key events in September that has an awful performance history, investors should be better off if they avoid these stocks in the near term.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>