Missed the S&P 500's impressive 14.1% rally this year so far? Don't worry — there's still plenty of time and ways to make some money.
Ten S&P 500 stocks, including mostly tech plays like Micron Technology and KLA plus an industrial like Copart, turn on the jets in the second half following a great first-half like the market just had. All these stocks topped the S&P 500 each of the past five times the index rose 10% or more in the first half, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence, CFRA and MarketSmith. Plus, they all jumped, on average, more than 36% just in the second half.
And that's just the start of the good news for investors wondering if there's still time to participate in the market despite gains this year. Simply stated: A good first half is usually the opening act for an even better second half.
"Now that the first half is nearly complete, history again offers encouragement, since the S&P 500's second half return typically doubled its normal 77-year average second-half return following a first-half gain in excess of 10%," said Sam Stovall, chief investment strategist at CFRA.
Liked The S&P 500's First Half? You'll Love The Second Half
Savvy investors know market strength tends to beget more strength. So with the S&P 500 up so much in the first half, you should be looking for opportunity, not running from it.
And it's easier than you might think. Since 1990, all "sizes, styles, sectors and 92% of all sub-industries gained in price in the second half following an S&P 500 rise in the first half," Stovall said. There's a pretty good sample size for this bullish pattern, too. The S&P 500 has gained 10% or more in the first half 22 times since 1945 and eight times since 1990. And the following second-half rally can be a sight to behold.
For instance, the S&P 500 rocketed more than 15% in the back half of 2013, even after rising 12.6% in the first, CFRA said. And the last time the S&P 500 rose 10% or more in the first half, in 2019, the index jumped another nearly 10% in the second half.
S&P 500 investors, though, definitely have a favorite type of stock for the second half. And it's usually tech.
Thanks, May I Have Another?
S&P 500 first-half rallies usually continue
| Year | First-half return | Second-half return |
|---|---|---|
| 1998 | 16.8% | 8.4% |
| 1999 | 11.7 | 7 |
| 2003 | 10.8 | 14.1 |
| 2013 | 12.6 | 15.1 |
| 2019 | 17.3 | 9.8 |
Source: CFRA
S&P 500 Techs Flourish In The Back Half
It might seem presumptuous to think S&P 500 tech stocks can keep flying following their stellar first half. But that's what usually happens.
The Technology Select Sector SPDR rocketed an average of more than 17.5% in the second half following the last five times it had a strong first half. That puts it well past the S&P 500's average 9.8% gain during those periods. And it's no surprise if you look at the S&P 500 stocks that did best following 10% first halves. Eight of the top 10 second-half performers are all from the information technology sector.
Micron, a maker of memory chips for computers, is the prime example. Shares shot up an average of 60.5% in the second half following the past five times the S&P 500 rose 10% or more in the first half. That's more than any other S&P 500 stock.
Investors won't need to wait long for information, either. Micron is expected to report quarterly profit on June 28. The company is seen losing $1.57 a share, a potentially low bar that's easy to beat. Shares of Micron are up 33.6% already this year.
KLA, a chip-equipment company, is another hot tech name in the back half. It shot up an average 44% following strong first halves. It's already up 26.5% this year. The company reports quarterly profit on July 27 and analysts are looking for profit to fall around 16%.
Not Just Tech
Not all back half winners are in tech, though. Industrial firm Copart rose 52% on average following first-half rallies. Shares of the vehicle reseller are already up more than 46% this year. Analysts think profit will rise nearly 11% this year.
There's no guarantee these S&P 500 back half winners will win again in the second half of 2023. But they certainly have a good track record.
Top Second-Half S&P 500 Stocks Following A 10%+ First Half
| Company | Ticker | Average gain | Sector |
|---|---|---|---|
| Micron Technology | 60.5% | Information Technology | |
| Copart | 52.2 | Industrials | |
| KLA | 44.1 | Information Technology | |
| Applied Materials | 42.5 | Information Technology | |
| Texas Instruments | 37.2 | Information Technology | |
| Microchip Technology | 32.4 | Information Technology | |
| Adobe | 27.8 | Information Technology | |
| Autodesk | 27.5 | Information Technology | |
| Bank of New York Mellon | 19.0 | Financials | |
| ANSYS | 18.7 | Information Technology |
Sources: CFRA, IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
