Terrified of owning stocks now? You're not alone, as stocks just suffered their worst quarter since 2011. But investors willing to hang in there can still find ways to win in the final three months of the year.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.
There are seven stocks in the Standard & Poor's 500, including cruise-line operator Royal Caribbean Cruises (RCL), energy firm Tesoro (TSO) and media company Yahoo (YHOO), that have turned on the jets in the last quarter of the year. Each of these stocks has beaten the S&P 500 in the fourth quarter each of the past five years and has delivered average fourth-quarter gains of 19.1% or greater, according to a USA TODAY analysis of data from S&P Capital IQ.
Don't think beating the market in the fourth quarter is an easy hurdle, either. The S&P 500 has actually performed very well in the fourth quarter the past five years — gaining an average of 6.9%. The S&P 500 has gained every fourth quarter going back five years with the exception of the 2012, when it declined 1%.
But that's nothing compared with the average 24.5% gain by Royal Caribbean Cruises during the fourth quarter of the past five years. During the fourth quarter of last year, the stock jumped 22.5%, while the S&P 500 gained 4.4%. One event investors get to look forward to in the fourth quarter is the company's third-quarter profit report, typically its biggest of the year. Royal Caribbean is expected to report its third-quarter profit on Nov. 9. Analysts are expecting quite a winner — forecasting adjusted quarterly profit to jump 23% to $2.71 a share.
Any sign of life would be welcome from the energy sector. Unlike many another energy firms, shares of Tesoro and Valero Energy are up 32% and 24% this year respectively as both are energy refiners — not exploration firms — thus not as much at the mercy of energy prices. If history is a guide, these stocks' momentum can continue. Shares of Tesoro have gained 23.8% on average in the fourth quarter the past five years. The company is expected to report third-quarter profit on Nov. 5, and analysts think it could be 78% higher than the same period a year ago.
There's reason to be skeptical if the stocks that have done well in the fourth quarter the last five years can repeat their magic. That concern is perhaps accurately directed toward Yahoo. Shares of Yahoo have gained an average of 22% in the past five fourth quarters. But the company is in a much different place now, as investors worry about the slow growth of its core business. Yahoo plans to spin off its stake in the Alibaba Chinese e-commerce site, too, meaning the stock will have to trade on its own merit. Shares are down more than 40% this year.
It's understandable to fear the fourth quarter. But investors know that fear is often overblown.
BEST-PERFORMING S&P 500 STOCKS IN THE FOURTH QUARTER
Company (symbol) avg. Q4 performance *
Royal Caribbean Cruises (RCL) 24.5%
Tesoro (TSO) 23.8%
Valero Energy (VLO) 22.5%
Yahoo (YHOO) 22.1%
Lennar (LEN) 21.1%
Vulcan Materials (VMC) 19.4%
Western Digital (WDC) 19.1%
Sources: S&P Capital IQ, USA TODAY
* Based on the past five fourth-quarter periods
Matt Krantz
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