Why settle for stocks limping to the finish line? Some investors found S&P 500 stocks that finish the year on a tear.
Thirteen S&P 500 stocks — including tech plays like Broadcom and Lam Research and health care stocks like Cigna Group — reliably turn on the jets in the last three months of the year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
All 13 stocks topped the S&P 500 in the final quarter of each of the past five years. Additionally, these stocks delivered average fourth-quarter gains of 10% or higher — more than double the S&P 500's rise in that time.
There's good reason to look for S&P 500 stocks that can light it up at the end of the year. The rest of the S&P 500 is losing steam as rising interest rates siphon money from stocks into cash and bonds.
"Almost half — five of 11 — of S&P 500 sectors are now down on the year, and three others are within 3% of going negative in 2023," said Nicholas Colas of DataTrek Research.
Looking For Better Months Ahead
Investors are looking for some relief from the rough month of September. And October is known for offering some redemption.
October is known ominously as the "jinx month," says the Stock Trader's Almanac. But it's also the month of the "bear killer," when many stocks pick themselves up and resume rallying. The month ranks as the seventh best of the year for the S&P 500. Stocks gained an average of 0.9% in the month going back to 1950.
But the month is just the start of some stocks' solid end-of-year runs.
Picking Up The Chips In The Fourth Quarter
Information-technology stocks can do well in the final months of the year. It's just not the megacaps you might normally expect.
Computer networking chipmaker Broadcom is the top-performing S&P 500 stock in the last three months of the year. It's rocketed 20.2% higher in the fourth quarter in the past five years on average. That's pretty solid if you consider the S&P 500 rose just 4.8% on average during that period.
Best of all, Broadcom just doesn't miss. AVGO stock gained 14% or more in four of the past five months. It soared nearly 26% in just the fourth quarter of 2022 alone — besting the S&P 500's 7.1% rise in that time. And the only time Broadcom stock didn't rise at least 10% was in the last three months of 2018. It only rose 3.1%. But that's actually pretty good if you consider the S&P 500 lost 14% in that period.
Investors are already piling in. Shares of Broadcom are up nearly 50% this year already. Much will hinge on what the company says about its earnings on Dec. 8. Analysts think the company's full-year profit will rise nearly 12%.
But it's not just Broadcom in the chip industry with the big year-end results. Rival Lam Research is a similar fourth-quarter outperformer. It gained 20% on average in the final three months of the past five years. It fell an S&P 500-beating 10.2% in the fourth quarter of 2018. But it's gained double-digit percentages since then.
Not bad.
Health Care Strong In Back End Of Year
Both tech and health care S&P 500 sectors sport more than their fair share of winners in the fourth quarter. Five of the top 13 stocks in the final three months of the year are in the tech sector. Another five are in health care.
Think stocks like insurer Cigna. Unlike other S&P 500 stocks that fade at year's end, this health insurer gained an average of nearly 17%. Last year alone, it shot up nearly 20% in the fourth quarter. So far, investors aren't jumping in: Shares are down 13.2% year to date. Analysts think the company's profit will rise nearly 7% in 2023.
Certainly, there's no guarantee any or all of these stocks will repeat their stellar year-end performances. But investors tired of watching their gains slip away will clearly move quickly to where the action is.
Top Fourth-Quarter S&P 500 Stocks
All these stocks outperformed in the final three months of the past five years:
| Stock | Ticker | Sector | Avg year-end chg |
|---|---|---|---|
| Broadcom | Information Technology | 20.2% | |
| Lam Research | Information Technology | 20.0 | |
| KLA | Information Technology | 17.3 | |
| Cigna | Health Care | 16.6 | |
| AbbVie | Health Care | 16.5 | |
| Mettler-Toledo | Health Care | 16.0 | |
| Elevance Health | Health Care | 15.7 | |
| Eli Lilly | Health Care | 14.4 | |
| Microchip Technology | Information Technology | 13.4 | |
| CBRE Group | Real Estate | 13.1 | |
| PPG Industries | Materials | 11.7 | |
| Bank of New York Mellon | Financials | 11.5 | |
| Amphenol | Information Technology | 10.5 |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on X(Twitter) @mattkrantz
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