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The third quarter recently came to a close with all three major indices posting strong gains. The S&P 500 gained nearly 6 percent over the past three months to log its best third quarter performance since 2010, while the Dow Jones Industrial Average and Nasdaq increased 4.3 percent and 6.2 percent, respectively. Central banks around the world injected more liquidity into financial markets and propelled equity prices higher. However, investors may want to consider booking profits in some historically fourth quarter challenged companies.
With the election, fiscal cliff, reduced growth outlook and diminishing returns on quantitative easing programs, investors have plenty of reasons to be cautious this fourth quarter. Focusing specifically on the S&P 500, investors may want to be even more skeptical on the names that traditional see a pullback in the absence of these issues.
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Bespoke Investment Group, a market research firm, recently named the top stocks in the S&P 500 that have declined more often than they have increased during the fourth quarter over the past ten years. The list below contains eleven companies in the index that have been clear losers in the final three months of the year, along with their respective average returns. Bespoke notes that all of the stocks on the list below have traded lower during the fourth quarter at least six times since 2002.
Big Lots (NYSE:BIG) -8.1 percent
Electronic Arts (NASDAQ:EA) -6.4 percent
Kohl’s (NYSE:KSS) -6.3 percent
Sprint Nextel (NYSE:S) -4.1 percent
Symantec (NASDAQ:SYMC) -3.4 percent
Macy’s (NYSE:M) -1.4 percent
Tyson Foods (NYSE:TSN) -1.4 percent
Lockheed Martin (NYSE:LMT) -0.9 percent
Hershey (NYSE:HSY) -0.7 percent
Coventry Health Care (NYSE:CVH) -0.2 percent
Amgen (NASDAQ:AMGN) 0.9 percent
Big Lots tops the list, declining six times in the fourth quarter between 2002 and 2011. The retailer posted huge back-to-back losses in 2007 and 2008, both north of 40 percent. Although Amgen has an average gain of 0.9 percent in the final quarter of the year, it has declined in seven of the past ten fourth quarters. Shares of Sprint Nextel have already plunged more than 11 percent to start the fourth quarter this year.
Several names on the list include retailers that may be expected to perform well in the holiday enhanced quarter. Bespoke explains, “While the holiday shopping season is typically a good time of year for retailers in terms of their bottom line, the fourth quarter is not necessarily a great time of year for the stocks of individual retailers. As shown in the list, three of the eleven names highlighted (BIG,KSS and M) are retailers and two of the three have averaged declines of more than five percent. Furthermore, video games, cell phones, and chocolate are often among the list of popular gifts during the holiday shopping season, but don’t tell that to Electronic Arts, Sprint Nextel or Hershey.”
On the positive, the National Retail Federation believes this holiday shopping season will be stronger than those in recent years. The organization predicts that holiday sales this year will increase 4.1 percent to $586.1 billion. The forecast is above the 10-year average holiday sales increase of 3.5 percent. “This is the most optimistic forecast NRF has released since the recession. In spite of the uncertainties that exist in our economy and among consumers, we believe we’ll see solid holiday sales growth this year,” claims NRF President and CEO Matthew Shay.
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