Quantitative easing policies may become more clear this month. Does that mean it's a good time to buy?
September is historically a sleepy month for stock prices. The Dow Jones, for example has been down in September about 60% of the time since 1950. Part of the problem is seasonal - individuals can be reluctant to take on much risk after a profligate summer. However, the markets seem even more apprehensive about the month than usual this year. The recent report for July durable goods was down (a troubling sign for the economy), and the latest jobs report was lukewarm at best.
While markets were up again today on the news that US engagement in Syria may be less likely, September has been off to a slow start. We're still seeing lingering uncertainty about the Fed, and anticipation continues to swirl around the upcoming budget debates in Congress.
Yet some analysts are projecting a more bullish outlook by the end of the month. Speculation about the next Federal Reserve Chair has lent volatility to the market for months. When President Obama finally announces his pick, investors will have a better idea of when (and how) Ben Bernanke's quantitative easing (QE) will be taken out of the markets. Quantitative easing is a sometimes controversial tactic pursued by central banks to stimulate a lagging economy.
Generally a central bank stimulates the economy by changing the interest rates on government bonds, which makes people more willing to borrow, spend, and consume - theoretically resulting in the creation of new jobs. When interest rates are already low, a central bank can opt to buy back existing bonds or securities, adding liquidity to the market when low interest rates weren't enough.
When the financial crisis hit, Chairman Bernanke decided initiate QE. However, the economy can become dependent on all that easy money; or at the very least uneasy about when it's going to be taken away. And uncertainty about when the cash flow ends makes you less likely to invest. But if the government continues to buy bonds for too long, it can add too much cash to the market, resulting in inflation and price increases.
So September brings many factors to consider. So far, the outlook for stock prices in October is more optimistic. The announcement of the next Federal Reserve Chair is likely to calm the markets, regardless of who it is. A winding-down of Syria fears increases the likelihood that Congress will find time to pass a budget, which would ease uncertainty further.
We decided to take a closer look at September, to see which stocks might be undervalued in the current market. We ran a screen looking at stocks being bought by institutional investors like hedge funds - that experienced significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that some fund managers expect these stocks to outperform in the future.
Next we narrowed down our list by limiting our results to those companies reporting earnings in the second half of the month, as upcoming earnings dates can increase the volume of a stock's trading.
We were left with six stocks on our list.
Click on the interactive chart to see data over time.
Your browser does not support iframes.
1.CalAmp Corp. (CAMP, Earnings, Analysts, Financials):Develops and markets wireless communications solutions that deliver data, voice, and video for critical networked communications and other applications in the United States. Market cap at $588.31M, most recent closing price at $17.02.
2.Diamond Foods, Inc. (DMND, Earnings, Analysts, Financials):Engages in processing, marketing, and distributing snack products, as well as culinary, in-shell, and ingredient nuts. Market cap at $486.78M, most recent closing price at $22.31.
3.FactSet Research Systems Inc. (FDS, Earnings, Analysts, Financials):Provides financial and economic information to investment community worldwide. Market cap at $4.64B, most recent closing price at $105.53.
4.GenCorp Inc. (GY, Earnings, Analysts, Financials):Engages in the manufacture and sale of aerospace and defense products and systems in the United States. Market cap at $910.95M, most recent closing price at $15.31.
5.NetSol Technologies, Inc. (NTWK, Earnings, Analysts, Financials):Designs, develops, markets, and exports software products primarily to the automobile finance and leasing, banking, healthcare, and financial services industries worldwide. Market cap at $81.85M, most recent closing price at $9.81.
6.Rite Aid Corp. (RAD, Earnings, Analysts, Financials):Operates retail drugstores in the United States. Market cap at $3.12B, most recent closing price at $3.49.
(List compiled by James Dennin. Institutional information sourced from Fidelity, stock prices sourced from Yahoo! Finance. All other data sourced from Finviz.)
Use Kapitall's Tools: Looking for ways to analyze this list?Use this article snapshot as a launch pad: Simply click on the links, and use Kapitall's tab navigation to browse through the data...
Analyze These Ideas: Getting StartedRead descriptions for all companies mentioned Access a performance overview for all stocks in the list Compare analyst ratings for the companies mentioned Compare analyst ratings to annual returns for stocks mentioned Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, FilingsCalAmp Corp.(CAMP, Chart, Download SEC Filings) Diamond Foods, Inc.(DMND, Chart, Download SEC Filings) FactSet Research Systems Inc.(FDS, Chart, Download SEC Filings) GenCorp Inc.(GY, Chart, Download SEC Filings) NetSol Technologies, Inc.(NTWK, Chart, Download SEC Filings) Rite Aid Corp.(RAD, Chart, Download SEC Filings)
© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.
Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.
Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC.
Securities products and services are offered by Kapitall Generation, LLC - a FINRA/SIPC member.