“Sell in May and Go Away” is an adage sometimes used to describe the weaker summer months for the stock market. Since 1990, the market has produced an average 2% return between May and October compared to an average 7% return the rest of the year.
However, that doesn't mean there aren't stocks poised to rise during the hotter months. Many companies can thrive when the rest of the market wilts. We asked our experts their thoughts on which summer stocks could get red hot.
One of our experts, Jay Rishel (CFP) of Overman Capital Management, sees the summer months when Americans use more energy and natural resources. Because of this, a few stocks in this sector he feels could not only benefit from the summer months but are long-term candidates as well.
Pioneer Natural Resources (PXD)
Operating out of the Permian Basin in the southwestern part of the US, Pioneer Natural resources has the potential to be a hot summer stock. Rishel says, “Positioned to benefit from the high oil price, focused on returning capital to shareholders via dividends.”
Nutrien Ltd. (NTR)
Another stock Rishel thinks could have a good summer is Nutrien Ltd (NTR). “NTR is the largest fertilizer producer by capacity. Supply chain issues and tight inventory have pushed fertilizer prices higher (see Russia's invasion of Ukraine), and NTR can benefit from this.”
According to Rishel, Enbridge is a stock that could start to get hotter over the summer months. “North America's largest energy infrastructure company, strong dividend yield over 5%, has a diverse set of natural gas and oil pipelines and a utility business with over 3.5m customers.” The substantial dividends make Enbridge an attractive stock to hold onto even as the weather cools down.
Rishel's last hot summer stock is Honeywell (HON). “A good dividend, diverse set of products, a pickup in defense spending, and improving supply chain should benefit them.” Honeywell makes many home products built for summers, such as fans, air purifiers, and thermostats.
Joshua Lutkemuller, CFA of StrongSide Asset Management, see's Disney as a strong summer investment. Losing almost 30% of its market cap in 2022, Joshua views this as the perfect time to invest in the entertainment juggernaut.
“The second-quarter earnings had some ups and downs, missing on revenue figures ($19.25B vs. $20B est.) and earnings figures (EPS of $1.08 vs. $1.19 est.). However, I expect momentum to persist in the year's second half as parks are gaining momentum going into the summer. Disney parks brought in $6.7B of revenue, nearly double that of the park's revenue from last year.”
Not only is Disney looking at their parks as an uptick in stock price, but their streaming service is also pulling in substantial numbers. “In Q2, Disney+ added nearly 8 million subscribers, crushing analyst estimates of 2.7 million. This brings Disney+'s subscriber base to 137.7M, which has eclipsed Netflix's subscriber growth rate. So it is hard to argue that Disney doesn't have a promising future, and at this price, it is worth looking at.”
Other Stocks to Watch
Home Depot (HD)
A leader in DIY projects, Home Depot tends to see a bump in sales during Q2 and Q3 when people are doing projects in or outside their homes. So not only is HD a good summer stock but it's consistently raised its dividends over the years, making it a long-term investment as well.
One could argue that all airline stocks could be good summer stock picks, and they'd be right. However, Delta stands out due to its international presence. Travel typically sees an uptick during the summer months, so it only stands to reason companies in this space see better stock performance too.
Avis Budget Group is another company that benefits from summer vacations. Boasting brands like Avis, Budget, and ZipCar, there is something for travelers of all kinds. Even if you fly to your destination, you'll still need a car to get around once you are there. You'll find no shortage of locations as you can find Avis in more than 11,000 locations worldwide.
As the weather warms up, many of our spending habits change. This could lead to high sales and, therefore, higher stock prices for many “summer stocks.” Stocks in the travel industry, lawn care, pool supplies, energy, or other industries are typical summer stocks that could start to heat up along with the weather.
Many of the stocks mentioned by our experts are good for the summer and, due to strong dividend payouts, are good long-term investment candidates as well. No matter what you invest in, do your research, budget your money, and only invest what you can afford to lose.
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