October, historically a volatile month for the stock market, presents unique challenges for investors. While the S&P 500 boasts an average daily move of 1.3% higher or lower in October since 1950 (even excluding the dramatic 1987 crash), CNBC Pro has identified a handful of relatively stable stocks that could offer a haven during market turbulence. These stocks, selected based on their low volatility (3-year Beta less than 1), consistent October performance (median gain of 3% or more over the past 10 Octobers), and resilience (no losses exceeding 1.5% in any of the past 10 Octobers), provide a compelling case for investors seeking stability in an unpredictable market.
Five Stocks to Weather October’s Market Volatility
Key Takeaways: Navigating October’s Market Uncertainty
- October is historically volatile: The S&P 500 experiences significant daily price swings during this month.
- Safe-haven stocks identified: CNBC Pro has pinpointed five stocks exhibiting low volatility and consistent October performance.
- Dominance of utility stocks: Power companies, specifically, show remarkable stability due to their rate-sensitive nature.
- Truist Financial as an outlier: This bank offers a non-utility option within the group of stable stocks.
- Analyst sentiment varies: While some stocks receive strong buy ratings, others have more cautious outlooks.
The Power of Utility Stocks in October
The majority of the stocks identified as safe havens are utility companies. This isn’t surprising, given the sector’s recent performance. With investors anticipating a lower interest rate environment, rate-sensitive utility stocks have significantly outperformed the broader market. Year-to-date, the sector is up nearly 27%, exceeding the S&P 500’s 20% gain. This consistent performance, particularly in periods of market uncertainty, highlights the sector’s inherent stability.
NextEra Energy, FirstEnergy, American Electric Power, and PPL: A Deep Dive
Companies like NextEra Energy, FirstEnergy, American Electric Power, and PPL all meet the stringent criteria. Each boasts a median gain of 3.5% or more over the past 10 Octobers and a three-year beta of 0.75 or lower, indicators of their resilience and low volatility. Their year-to-date performance is equally impressive: NextEra Energy is up nearly 39%, FirstEnergy has gained around 20%, American Electric Power is up nearly 25%, and PPL has seen a 22% rise. However, analyst sentiment varies. While NextEra Energy enjoys a largely positive outlook (two-thirds of analysts rating it a buy or strong buy), American Electric Power currently holds a consensus “hold” rating. PPL, meanwhile, adds an enticing dividend yield of 3.2% to its stability profile for investors seeking additional income.
Truist Financial: A Bank Among Utilities
Truist Financial stands out as the only non-utility company on the list. Despite its different sector, it exhibits comparable stability, with a median gain of 3.66% over the past 10 Octobers and a beta of 0.81. Its year-to-date performance stands at a respectable 15.6%. However, analyst sentiment is more mixed for Truist, with a consensus rating of “hold”. Interestingly, the consensus price target suggests a potential upside of more than 9% from Thursday’s closing price, hinting at further growth potential.
Navigating Analyst Sentiment and Price Targets
It’s crucial to note that analyst ratings and price targets provide valuable context but should not dictate investment decisions solely. While a “buy” rating might be encouraging, the market’s reactions are complex and influenced by myriad factors. Similarly, while a stock might be trading above its average price target, that doesn’t necessarily mean an impending decline; it simply suggests potential for consolidation or sideways trading. Investors should always conduct thorough due diligence and consider their personal risk tolerance before committing to any investment.
Beyond the Numbers: A Holistic Approach to Investing
The data presented emphasizes the stability and historical October performance of these five stocks. However, investment decisions shouldn’t hinge solely on historical data or short-term market fluctuations. A comprehensive approach involves understanding the underlying fundamentals of each company, their long-term growth prospects, and their place within their respective sectors. This is critical for navigating the inherent uncertainties of the stock market, especially during volatile periods like October.
Disclaimer:
This article presents information based on publicly available data and should not be construed as financial advice. Investing in the stock market involves inherent risks, and past performance does not guarantee future returns. Consult with a qualified financial advisor before making any investment decisions.
