August isn't a great month for the S&P 500 — it's actually on average the third-worst month of the year. But savvy investors can still pick up some big gains in the challenging month.
Eight S&P 500 stocks, including health care play Insulet, tech EPAM Systems and consumer discretionary Norwegian Cruise Line, topped the S&P 500 in August in each of the past five years, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And all these stocks returned 4.4% on average during the month, roughly double the S&P 500's gain in that time.
Finding winning stocks will be investors' top priority in August. Why? The S&P 500 is on fire, posting a 20.65% year-to-date total return this year so far. Investors will want to add to their big gains. "This is the largest year-to-date gain (through July) since 1997," said S&P Global Market Intelligence in a report.
Sizing Up August For The S&P 500
August has turned into a month many S&P 500 investors would rather sit out. All the more reason to stick with the winners.
Since 1987, August has been second-worst month of the year, says "Stock Trader's Almanac." And it's the third-worst month of the year since 1950 with an average annual gain of just 0.1%.
But it hasn't always been this way. August was actually the best month of the year for stocks from 1901 to 1951. Back then, much of the market benefited from agricultural harvesting season on the farms, the Almanac says.
Just recently, though, August returns have been decent. The S&P 500 gained an average of 2.3% in the month in the past five years. Investors today, though, must look beyond the farm to haul in big profits.
Top S&P 500 Stock In August: Insulet
Talk about good timing. Insulin delivery company Insulet joined the S&P 500 just this year — replacing the holding company of Silicon Valley Bank.
And that's helpful for investors in August. The stock has a tendency to outperform during the month. It topped the S&P 500 in August in each of the past five years. And it posted an impressive annual average gain of 12.5% during those months. That makes Insulet the No. 1 consistent returning S&P 500 stock in August. Plus, the stock has never fallen in the month of August in at least the past five years.
The company is expected to report its June-ending quarterly results on Aug. 8. Analysts think the company will make 26 cents a share on an adjusted basis, reversing a loss in the same year-ago period.
But despite the stock's big performance in August in years past, shares are still down more than 8% this year so far.
Other August Winners, Too
But it's not just newcomers in the S&P 500 that shine in August. Another big winner in the month is EPAM, a company that helps other companies safeguard data.
Shares rocketed an average 11.1% in August in the past five years. Last August, shares soared more than 22%, while the S&P 500 itself fell 4%. The company is set to report quarterly profit this week. And analysts think it will earn $2.34 a share, down slightly from what it earned in the same period a year ago. That might explain why the stock is down more than 27% this year. But EPAM is full of surprises. It topped earnings expectations every quarter since at least September 2019.
Not all August winners in the S&P 500 are down this year so far, though. Norwegian Cruise Line shares are up roughly 60% this year. That makes it one of the best S&P 500 stocks this year. But Norwegian is also a big winner in August. It rose an average 10% in August in the past five years. The company reports second-quarter results on Aug. 7. Analysts are calling for it to earn 30 cents a share, reversing a year-ago loss of $1.14 a share.
August may be an underwhelming month for most of the S&P 500. But if you pay attention, you can still add to your impressive year-to-date gains during the month.
Top S&P 500 Stocks In August
Beat the S&P 500 every August in the past five years
| Company | Ticker | Avg. August % gain | Sector |
|---|---|---|---|
| Insulet | 12.5% | Health Care | |
| EPAM Systems | 11.1% | Information Technology | |
| Norwegian Cruise Line | 10.0% | Consumer Discretionary | |
| Lowe's Companies | 7.4% | Consumer Discretionary | |
| Sysco | 7.3% | Consumer Staples | |
| Motorola Solutions | 7.3% | Information Technology | |
| Darden Restaurants | 4.8% | Consumer Discretionary | |
| Walmart | 4.4% | Consumer Staples |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
