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October Might Reverse Effects of a Fateful September: 5 Picks

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The month of October, historically, has been the most volatile stretch for equities. The Stock Trader’s Almanac, in fact, describes October to be a “jinx month” for stocks. On average, the S&P 500 and the Dow have declined more or less 1% in October
 
October has usually seen some serious market crashes, and its performance was particularly bad during the 2008 financial crisis. Both the S&P 500 and the Dow tanked almost 17% and 14.1%, respectively, in the October of 2008. But when it comes to severe volatility, no one knows why October has such a spooky reputation. Is the volatility due to the worst stock market crashes in U.S. history that happened in October? Well, no one has a clear explanation! Is it because the month tends to precede an election? But again, the answer is not known.
 
However, this time around, it’s a closely contested election, with neither the Republicans nor the Democrats having a clear edge over the other. And it’s going to be an acrimonious election contest as well. After all, both the parties are involved in a slugfest in nominating Supreme Court Justice Ruth Bader Ginsburg’s replacement. And if it doesn’t happen soon, the much-needed additional stimulus for economic growth would get delayed causing serious harm to corporates and individuals. To top it, Trump is already questioning the mail-in-ballots as he believes that the system can easily be manipulated.
 
Thus, election-led volatility cannot be completely ruled out. Moreover, doubts are certainly increasing about what more the Fed could possibly do to stimulate the coronavirus marred-economy. However, not all hopes are lost. U.S. consumers have shown enough resilience amid the pandemic. They are, currently, not only confident about their financial prospects but are also optimistic about more jobs and better business prospects in the months ahead. According to the Conference Board, the index of consumer confidence jumped 15.5 points to 101.8 in September from August’s upwardly revised 86.3. It’s the biggest one-month leap in 17 years and easily surpasses economists’ expectation of a reading of 90 for September (read more: US Consumers Gain Confidence in Economy: 5 Winners).
 
All at once, there has been an improvement in Chicago region business activity in September, indicating that manufacturing is steadily picking up. According to MNI Indicators, the Chicago Purchasing Managers Index climbed to 62.4 in September from 51.2 in August. Notably, any reading above 50 shows improving conditions.
 
While renewed consumer confidence coupled with improvement in manufacturing is expected to lift Wall Street in the short term, historically, stocks have actually done better in October after a dreadful September.
 
The S&P 500 and the Dow ended September with a drop of nearly 3.9% and 2.3%, respectively. It’s essentially the worst September performance since 2011. But Dow Jones Market Data indicates that 70% of the time the S&P 500 gained in the following month after it had lost at least 3.5% in September. Similarly, the Dow generally scales northward in October after a decline of a minimum of 2% in September.

5 Best Stocks to Buy in October

With the stock market expected to bounce back in October after an ugly September, investing in fundamentally sound stocks that are poised to gain in the near term seems judicious. We have selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Further, we have zeroed in on stocks that have seen positive earnings estimate revision, usually in the past two-month period. Rising earnings estimates generally indicate that the stock will outperform the market in the near future. After all, earnings estimates are one of the most powerful metrics that measures the fundamental strength of a company (read more: Bulls and Bears Locked in Slugfest: Here's How to Play It).
 
Atlas Air Worldwide Holdings (AAWW - Free Report) provides outsourced aircraft and aviation operating services. 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 year is 122.3%.
 
Best Buy Co., Inc. (BBY - Free Report) is a specialty retailer of consumer electronics. The Zacks Consensus Estimate for its current-year earnings has moved up 26% over the past 60 days. The company’s expected earnings growth rate for the current year is 17.3%.
 
Beazer Homes USA, Inc. (BZH - Free Report) designs, builds and sells single-family homes. The Zacks Consensus Estimate for its current-year earnings has moved 8.5% north over the past 60 days. The company’s expected earnings growth rate for the current year is 20.5%.
 
1800 FLOWERS.COM, Inc. (FLWS - Free Report) is a leading e-commerce provider of floral products and gifts, in terms of the number of customers and revenue generated. The Zacks Consensus Estimate for its current-year earnings has moved 29.3% up over the past 60 days. The company’s expected earnings growth rate for the next quarter and current year is 11.6% and 8.2%, respectively.
 
Zoom Video Communications, Inc. (ZM - Free Report) provides a video-first communications platform. The Zacks Consensus Estimate for its current-year earnings has advanced 88.1% over the past 60 days. The company’s expected earnings growth rate for the next quarter and current year is 313.3% and 577.1%, respectively.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
 
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan. 
 
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.