August is feared as one of the worst months for the S&P 500 — and for good reason. But investors still find ways to make big money.
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Eight stocks in the S&P 500, mostly tech and communications services firms like Nvidia (NVDA), IBD Long-Term Leader Microsoft (MSFT) and Twitter (TWTR), are complete standouts in the S&P 500 in August, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
All these stocks not only topped the S&P 500 in August in each of the past five years. They also all posted average gains in the month of 4% or more.
And that qualifies as a good August — which for most people ranks among the very worst months of the year.
August Is Usually Tough For The S&P 500
Going back to 1950, the S&P 500 slipped 0.2% in August on average, says Stock Trader’s Almanac. That ranks August as the eleventh-worst month of the year for the index.
And underperformance in August isn’t a fluke. It can sometimes come in dead last.
“August is the worst … S&P 500 month during 1988 through 2020,” says Stock Trader’s Almanac. “In post-election years since 1950, August is still ranked no higher than #11 while average performance slips deeper into negative territory.”
More recently, though, August spared S&P 500 investors some of the pain.
Last August, for instance, the S&P 500 vaulted 7% higher during the month. It was at that time investors began to anticipate the reopening of the economy. But in just the prior August of 2019, the S&P 500 slipped 1.8%.
But not all S&P 500 stocks suffer in August.
Technology Is The S&P 500 Place To Be In August
Just one S&P 500 sector routinely skates through August. And it’s technology.
The Technology Select Sector SPDR (XLK) is the only sector out of the 11 that topped the S&P 500 in each of the past five years. And during August the past five years, the tech sector gained 4.2% on average. That’s a particularly strong showing if you consider the S&P 50o only rose 1.6% on average in August going back to 2016.
And it’s not just the overall S&P 500 tech sector that outperforms in August. Drilling down into the individual tech stock winners tells the same story. Six out of the eight top performing S&P 500 stocks in August hail from the tech sector.
Take the No. 1 performer in the month: high-end computer chip maker Nvidia. It topped the S&P 500 during August in each of the past five years. But it’s also put up an average gain in the month of 10.3%. All eyes are on whether Nvidia can pull it off again. Shares are already up nearly 50% this year.
Analysts are looking for the company in August to report 53% lower adjusted second-quarter profit of $1.02 share. But Nvidia has a knack at overdelivering. Profit in the first-quarter topped expectations by more than 350%. Should you buy Nvidia stock now?
Another big tech winner in August is Microsoft. The software giant’s shares pushed 4.3% higher in August, on average, the past five years.
Get Ready For August S&P 500 Surprises
August is only starting, and already investors are coming off some surprises. Expect more.
Take Twitter for instance. It, too, is a strong August performer. It’s risen more than 8.5% in August, on average, in the past five years. Shares are already up 28.6% this year. Why? The communications firm reported, in July, a profit of 20 cents a share. That demolished expectations by more than 185%. That ranks as one of the top surprises in an already robust second-quarter profit reporting season.
So, yes, August isn’t usually great for the S&P 500. But you can still find winners if you pick your spots in this tricky month.
Top S&P 500 Stocks In August
All topped the index in each August for at least past five years
| Company | Ticker | Average % ch. in August | YTD % ch. | Sector | Composite Rating |
|---|---|---|---|---|---|
| Nvidia | (NVDA) | 10.3% | 49.4% | Information Technology | 99 |
| Synopsys | (SNPS) | 9.3 | 11.1 | Information Technology | 85 |
| (TWTR) | 8.6 | 28.8 | Communication Services | 92 | |
| Mastercard | (MA) | 6.8 | 8.1 | Information Technology | 85 |
| Visa | (V) | 5.6 | 12.6 | Information Technology | 86 |
| Intuit | (INTU) | 5.5 | 39.5 | Information Technology | 93 |
| Cintas | (CTAS) | 5.1 | 11.5 | Industrials | 89 |
| Microsoft | (MSFT) | 4.3 | 28.1 | Information Technology | 96 |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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