October somewhat lived up to its name as a "jinx month" for the S&P 500. But investors who found top stocks still won big gains — adding to 2020's growing rewards.
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Don't be too discouraged that the S&P 500 fell 2.8% in October. Investors paying attention could still find plenty of gains. More than 40% of the stocks in the S&P 500 gained in October, topped by leaders like health care firm Align Technology (ALGN), information technology Paycom (PAYC) and industrial Quanta Services (PWR). This means if you've been in the right place at the right time, you've made some money — even in this volatile market.
All told, had you invested $10,000 in January and reinvested your money into the S&P 500's top stocks each month, including in October, you'd have $449,652, an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith shows.
Hindsight is 20/20. And clearly, few if any investors could have pulled this off as it's not a repeatable strategy. But the staggering numbers are a reminder to investors big gains are possible even in volatile years if you focus on leaders. Meanwhile, had you put $10,000 in the S&P 500, you'd have just $10,120. The S&P 500, dragged down recently by lagging stocks and sectors, is up just 1.2% this year.
"Plenty of damage has been done from the past couple of week's selling," said a report from Bespoke Investment Research. "Every sector is lower over the past week with energy, financials and industrials having received the worst hits."
S&P 500: What Worked In October
The S&P 500's October decline of 2.8% isn't all that surprising. October is usually a middling month for stocks.
On average, the S&P 500 rises 0.8% in October, says "Stock Trader's Almanac," citing data tracking from 1950. But here's the wildcard this year: the election. The S&P 500 typically does worse in election years, falling 0.7% on average. This October has been worse than that. Also, investors continue to deal with what looks like a new surge in Covid-19 cases around the world.
"Pre-election market volatility is not unusual and has arisen around swirling questions about elections, Covid-19 and economic and earnings growth," said Wells Fargo Investment Institute's Head of Market Strategy Paul Christopher in a report. "This indigestion triggered declines in the S&P 500 index."
So what S&P 500 stocks worked in October? Many S&P 500 leaders showed they're shielded from struggles of other stocks. Four of the top 10 S&P 500 companies in October sport IBD Composite Ratings of 90 or higher. This means their stock charts and earnings top at least 90% of all stocks. Those are Align, Paycom, Quanta and financial stock SVB Financial (SIVB), which are up 30.2%, 17.0%, 18.1% and 20.8%, respectively.
Top S&P 500 Stocks In October
| Company | Symbol | October 2020 % Ch. | Sector | Composite Rating |
|---|---|---|---|---|
| Tapestry | (TPR) | 42.2% | Consumer Discretionary | 67 |
| Align Technology | (ALGN) | 30.2% | Health Care | 97 |
| Under Armour | (UAA) | 23.2% | Consumer Discretionary | 33 |
| SVB Financial | (SIVB) | 20.8% | Financials | 96 |
| General Electric | (GE) | 19.1% | Industrials | 20 |
| Comerica | (CMA) | 19.0% | Financials | 56 |
| Quanta Services | (PWR) | 18.1% | Industrials | 91 |
| Paycom Software | (PAYC) | 17.0% | Information Technology | 96 |
| General Motors | (GM) | 16.7% | Consumer Discretionary | 81 |
| Ford Motor | (F) | 16.1% | Consumer Discretionary | 66 |
Sources: IBD, S&P Global Market Intelligence as of Oct. 30 close
Owning The Month's Top Stock Turns $10,000 Into $449,652
Each month of this year told the story of investors' up-and-down moods all year. And in October, investors returned to hoping for a comeback in the consumer.
Tapestry (TPR), a seller of high-end consumer discretionary items like purses, jumped 42% in October. No other S&P 500 stock did anything near that. It's a continuation of investors trying to find consumer stocks that might bounce back from the pandemic. On Oct. 29, the company reported a 45% higher third-quarter profit of 58 cents a share. That was remarkable on two levels. First, it snapped the company's losses in the first and second quarters. Second, Tapestry's third-quarter profit topped expectations by 163%.
And notably, October is the fourth month in a row so far where the top S&P 500 stock is in the consumer discretionary sector. Last month, in September, restaurant Darden (DRI) jumped 16% as the S&P 500 dropped 4%. And the big winner in August was Royal Caribbean (RCL), adding 16% when the S&P 500 fell 4.1%.
And now all eyes are on November and the election. Big changes could be afoot.
"While history has shown that political parties have had little influence on the markets over longer time frames, an economic policy shift could have a profound impact on the markets over time," said Jack Ablin, Chief Investment Officer at Cresset Capital Management.
Top S&P 500 Stocks Each Month In 2020
| Month | Top S&P 500 Stock | Symbol | Stock monthly % Gain | Sector | S&P 500 % Monthly Gain | Cumulative Value Of $10,000 Investment In January Reinvested In The Top Stock Each Month |
|---|---|---|---|---|---|---|
| January | L Brands | (LB) | 27.8% | Consumer Discretionary | 0.0% | $12,780 |
| February | Regeneron Pharmaceuticals | (REGN) | 31.6% | Health Care | -7.9% | $16,816 |
| March | Citrix Systems | (CTXS) | 36.9% | Information Technology | -13.0% | $23,025 |
| April | Apache | (APA) | 155.3% | Energy | 10.9% | $58,782 |
| May | Abiomed | (ABMD) | 36.2% | Health Care | 6.5% | $80,061 |
| June | Occidental Petroleum | (OXY) | 36.6% | Energy | -1.4% | $109,363 |
| July | L Brands | (LB) | 76.1% | Consumer Discretionary | 8.8% | $192,588 |
| August | Royal Caribbean | (RCL) | 41.3% | Consumer Discretionary | 7.0% | $272,126 |
| September | Darden Restaurants | (DRI) | 16.2% | Consumer Discretionary | -4.1% | $316,210 |
| October | Tapestry | (TPR) | 42.2% | Consumer Discretionary | -2.8% | $449,652 |
Sources: IBD, S&P Global Market Intelligence as of Oct. 30 close
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