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5 Top-Ranked Stocks to Buy for the January Effect

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After a rough 2022, the stock market capped off 2023 with solid gains. While the 30-stock Dow climbed to record highs, the broader S&P 500 hovered near its all-time high and posted a whopping gain of 24% for the year. The Nasdaq, too, registered its best year since 2020, banking on AI optimism.

Most importantly, the momentum will continue this year, particularly in January. This is because of the “January Effect”, or a seasonal uptick in share prices throughout January. Stock prices tend to increase due to tax-loss harvesting and year-end bonuses being invested in the markets.

The January Effect is driven by positive consumer sentiment since many believe in investing at the beginning of a year for their future. Mutual fund managers’ initiatives to eliminate losers and hang on to best-performing stocks in their portfolio to improve year-end performance reports are an additional driver behind the January Effect.

Now, skeptics may not trust these catchy market adages. After all, the stock market has scaled northward about 57% of the time in January in the past 30 years. But this time, stocks are well-poised for further gains, thanks to the Federal Reserve’s dovish outlook amid ebbing inflationary pressure.

The Fed’s preferred inflation gauge dipped in November for the first time since 2020. In unison, retail inflation, as well as wholesale price pressures, have shown signs of cooling down, compelling the Fed to keep its benchmark fed funds rate unchanged in its latest policy meeting and hint at three more interest rate cuts this year (read more: 5 Top Stocks to Gain From Lower Interest Rates in 2024).

Needless to say, lower interest rates bode well for the broader stock market as they lead to an increase in consumer outlays, reduce the cost of borrowings and boost economic growth. Therefore, investors should make the most of the bullish seasonal patterns and a not-so-aggressive Fed by placing bets on growth stocks for stupendous returns.

The CBOE Volatility Index (VIX), by the way, is at present well below 20, indicating a low-risk environment, which undoubtedly suits growth investing.

Thus, investors should place bets on NGL Energy Partners (NGL - Free Report) , Beacon Roofing Supply (BECN - Free Report) , Granite Construction (GVA - Free Report) , Hooker Furniture (HOFT - Free Report) and Limbach (LMB - Free Report) since these stocks carry a Zacks Rank #1 (Strong Buy) and a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.

NGL Energy Partners is a limited partnership operating a vertically integrated propane business. NGL Energy Partners currently has a Growth Score of B.

The Zacks Consensus Estimate for its current-year earnings has moved up 141.8% over the past 60 days. NGL’s expected earnings growth rate for the current year is 155.7%.

Beacon Roofing Supply is the largest publicly traded distributor of residential and non-residential roofing materials. Beacon Roofing Supply currently has a Growth Score of A.

The Zacks Consensus Estimate for its current-year earnings has moved up 10.1% over the past 60 days. BECN’s expected earnings growth rate for the current year is 9.2%.

Granite Construction is one of the nation's largest infrastructure contractors and construction materials producers. Granite Construction currently has a Growth Score of B.

The Zacks Consensus Estimate for its current-year earnings has moved up 9.9% over the past 60 days. GVA’s expected earnings growth rate for the current year is 35.1%.

Hooker Furniture is a leading manufacturer and importer of residential furniture. Hooker Furniture currently has a Growth Score of A.

The Zacks Consensus Estimate for its current-year earnings has moved up 76.8% over the past 60 days. HOFT’s expected earnings growth rate for the current year is 12.4%.

Limbach provides building systems. Limbach currently has a Growth Score of A.

The Zacks Consensus Estimate for its current-year earnings has moved up 28.7% over the past 60 days. LMB’s expected earnings growth rate for the current year is 173.4%.

 

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