December might be the S&P 500’s third-best month of the year. But finding surefire winners during the last month of the year is tougher than it looks.
Only five S&P 500 stocks, including materials company CF Industries (CF), consumer discretionary plays Hilton Worldwide (HLT) and Marriott International (MAR) plus just one tech, Microsoft (MSFT), topped the S&P 500 in December in each of the past five years, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
“December is the No. 3 month for (the Dow Jones Industrial Average), S&P 500 and Nasdaq. It is also the second month of the ‘Best Months’ and best three consecutive month span,” says Stock Trader’s Almanac.
But be prepared to do your homework.
How December Fares For The S&P 500
December, generally speaking, is solid for the S&P 500. And it’s the gateway for some big gains down the road.
Stocks, on average, gained 1.5% during the month of December since 1950, says Stock Trader’s Almanac. And it sports a solid batting average, too. The S&P 500 rose more than 70% of the time during the month over the long run.
Some massive gains, too, are possible. The best December for the S&P 500 on record was an 11.2% gain in 1991. But at the same time, huge potholes can appear during the month, too. Just three years ago in 2018 the S&P 500 suffered a 9.2% loss, its worst December loss since 1950. The massive loss in 2018 is the reason why the S&P 500 is unchanged in the month, on average, over the past five years.
And very few S&P 500 stocks catch all this upside while skirting the brunt of the downside. But they’re out there.
Microsoft Stands Alone In S&P 500 Tech During December
Microsoft is the only S&P 500 technology stock that topped the S&P 500 in December in each of the past five years. But it hasn’t been a smooth ride.
On the positive side, Microsoft posted a gain in four of the past five Decembers. And it beat the S&P 500’s drop in the painful December of 2018. But it, too, got pounded. Shares of Microsoft fell 8.4% in December 2018. That’s market-beating, but the still-large drop means Microsoft’s average gain in December the past five years is 0.9%. Should you buy Microsoft stock now?
How does that compare with fellow megacap tech stock Apple (AAPL)? Apple’s average gain in December the past five years is higher than Microsoft’s at 2.6%. But unlike Microsoft, which topped the S&P 500 every December, Apple lagged in December 2017, falling 1.5%, and in December 2018, dropping nearly 12%. Should you buy Apple stock now?
Big S&P 500 Gainers In The Month
If technology isn’t the S&P 500 standout sector during December, then what is? Fertilizer ingredient maker CF Industries really lights it up in the month.
It’s the only stock in the S&P 500 to not only top the index in December the past five years, it actually rose during the month each year. Shares even jumped 3.1% in the ugly month of December 2018. That means CF rose, on average, 6.5% in December the past five years.
And then there’s consumer discretionary. It’s the only S&P 500 sector to have more than one stock beat the S&P 500 in December in the past five years. Interestingly, both stocks are hotel management companies. The expertly run Hilton Worldwide posted an average 3.9% gain in December during the past five years. Hilton only fell 5% in December 2018, when the S&P 500 was falling apart. The other is Marriott International, which rose 3.6% on average the past five years.
Hopes are high this December won’t be a repeat of 2018. Investors, too, look forward to the “Santa Claus Rally” in the last five days of the year and the first two in January. But for now, investors will brace for what the last month of the year brings them.
Top S&P 500 Stocks In December
They beat the market during the month in each of the past five years
|Company||Ticker||Sector||Dec. 2016||Dec. 2017||Dec. 2018||Dec. 2019||Dec. 2020||Dec. Avg.|
|Hilton Worldwide||(HLT)||Consumer Discretionary||8.5%||3.0%||-5.0%||5.6%||7.4%||3.9%|
|Marriott International||(MAR)||Consumer Discretionary||5.0%||6.9%||-5.6%||7.9%||4.0%||3.6%|
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz