The month of September has the dubious honor of being the worst performing month for the S&P 500. Blame it on post-summer depression or portfolio manager rebalancing; either way markets tend to trend lower into quarter end. The bright side is there’s a silver lining to September’s swoon. If you’re willing to take the long view, you’re typically rewarded by the end of November.
For those with cash, September’s historical downturn has served as a great buying opportunity.
The S&P 500 has finished November higher than it started September in 9 of the past 10 years, generating average and median returns of 1.95% and 4.07% respectively. That suggests you shouldn’t get too nervous if the market falls this month.
Instead, you may find it more helpful to consider buying companies in the consumer discretionary sector. Retailers are some of the best performers heading into fall as people digest back-to-school season and anticipate holiday spending. Over the past decade, the Consumer Discretionary SPDR ETF (XLY) has traded higher in 9 of the past 10 3-month periods ending November, increasing an average and median 2.88% and 4.78%, respectively.
These two retailers should be on your radar
There are two large-cap consumer discretionary companies you should watch this month. Costco Wholesale Corporation (NASDAQ:COST) and Urban Outfitters, Inc. (NASDAQ:URBN) have both posted strong returns through November, suggesting September may be a good time to buy.
Walk into Costco and the first thing you’ll notice is the sheer size of everything
Big buildings, big displays and big shopping carts — one steered by each hand — are common at Costco Wholesale Corporation (NASDAQ:COST). The company pioneered bulk buying and shoppers have been picking pallets since 1976. The company –one of the few that still reports monthly numbers — reported that sales at its 632 warehouse style stores improved 7% to $7.9 billion in July from last year. That brought fiscal year-to-date sales to nearly $95 billion, up 8% from 2012.
Part of this sales growth is tied to Costco Wholesale Corporation (NASDAQ:COST)’s growing international store count. Of the five warehouses opened in fiscal Q3, four were overseas. Of the nine stores slated to open in Costco Wholesale Corporation (NASDAQ:COST)’s fiscal fourth quarter, six are in overseas markets. Those additions will bring the total of new stores opened in fiscal 2013 to 28, up from 16 opened in 2012.