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This September Could Be Different: 5 Stocks to Buy

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It’s been a superb August for major stock indexes, the best month since the market rebounded in April from the pandemic lows hit in March. The broader S&P 500 climbed 7% last month, its best August performance since the 1980s. Similarly, the Dow and the Nasdaq rose 7.6% and 9.6%, respectively, in the month.

The month’s best performer no doubt has been tech, but there has also been a partial rebound in industries impacted by the coronavirus pandemic, including cruise liners, airlines, casino operators and hotels.

However, now the stock market is about to begin a historically challenging September. After all, since World War II, the S&P 500 on average declined 0.5% in the month of September, according to CFRA research company.

In fact, the Dow averaged a loss of 1% in September since 1937, while the Nasdaq, since its inception in 1971, averaged a loss of 0.5%, per Dow Jones Market Data.

What’s worse, the general belief is that stocks tend to lose further in September of election years since there is potential for even more volatility. However, that’s not the case. Since 1896, during presidential election years, the average return for the Dow has actually been positive.

And in case of the S&P 500, whenever the broader index has gained more than 5% in August, September gained an average 1.4%, according to Sam Stovall, chief investment strategist at CFRA.

Moreover, September’s reputation of being an awful month for stocks is also baffling as there is no convincing theory behind it.

Some say that since 1990, tax-loss selling from mutual funds resulted in a dismal September. But actually, Dow’s average loss prior to 1990 has been four times more than what it has been since then.

And let’s admit, there are plenty of reasons why one shouldn’t stay away from stocks this September. Stocks are expected to gain on optimism surrounding further stimulus from Washington and progress on a coronavirus vaccine.

U.S. lawmakers are expected to return to work in September after a recess in August. They are widely expected to resume talks to end a gridlock on a new coronavirus stimulus package, which will eventually benefit both consumers and businesses.

Investors, in the meantime, also anticipate that the world will finally overcome the COVID-19 pandemic in the near term, thanks to positive news on multiple vaccines in various stages of testing. Notable among them are the ones being jointly developed by the University of Oxford and AstraZeneca, and Pfizer with its partner BioNTech.

Last but not the least, the Fed’s latest policy shift, not to ratchet up rates to counter higher inflation anytime soon, has helped buoy investor optimism.

5 Best Stocks to Buy for September

Given the aforesaid positives, it’s expected that August’s momentum will continue into September. Banking on such bullish sentiments, investing in sound stocks poised to grow in the current period and beyond seems prudent. These stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stamps.com Inc. is a leading provider of Internet-based postage services. The Zacks Consensus Estimate for its current-year earnings has risen 57.6% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 10.7% and 28.5%, respectively. So far this year, the company’s shares have soared 202.6%.

Etsy, Inc. (ETSY - Free Report) offers e-commerce services. It provides online and offline marketplaces to buy and sell goods. The Zacks Consensus Estimate for its current-year earnings has climbed 88.1% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 375% and 169.8%, respectively. So far this year, the company’s shares have surged 170.1%.

DAQO New Energy Corp. (DQ - Free Report) is engaged in the manufacture and sale of high-quality polysilicon to photovoltaic product manufacturers. The Zacks Consensus Estimate for its current-year earnings has climbed 50.5% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 664.7% and 348.5%, respectively. The company’s shares have climbed 144.5% year to date.

Emergent Biosolutions Inc. (EBS - Free Report) is a specialty biopharmaceutical company that aims to offer specialized products to health care providers and governments to fulfil unmet medical needs and combat emerging public health threats. The Zacks Consensus Estimate for its current-year earnings has moved 83.2% north over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 57.9% and 117.2%, respectively. The company’s shares have jumped 118% year to date.

Atlas Air Worldwide Holdings is the parent company of Atlas Air and Polar Air Cargo, which together operate the world's largest fleet of Boeing freighter aircraft. The Zacks Consensus Estimate for its current-year earnings has risen 37.7% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 532.4% and 122.3%, respectively. So far this year, the company’s shares have rallied 107.4%.

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