In this article, we will take a look at the 10 Best Stocks to Buy Before Spring.
Seasonality in the Stock Market
Seasonality is simply a historical average of how the stock market performs over the course of the year. March has traditionally been a good month for equities, with prices rising more frequently than not and yielding a positive return on average. Furthermore, the first three months of spring often result in robust advances across all indexes. On the other side, because September is often a weak month for equities, a trader who generally takes long positions may choose to take the month off or sell their holdings earlier than normal if they begin to decrease during September.
Naturally, there are a number of investing strategies based on seasonal trends. “Sell in May and Go Away” is one such well-known financial aphorism that refers to a stock investment strategy based on the notion that the stock market underperforms during the six months of May to October. Historical facts have usually confirmed this adage throughout the years, particularly after 1945. Furthermore, the S&P 500 generates positive returns around two-thirds of the time from May to October, increasing to 77% from November to April.
Some possibilities surrounding this phenomenon include increased Christmas purchasing, holiday-fueled optimism, and investors settling their accounts before leaving for vacation. While growth is somewhat slow in February and March, the stock market often rises in April owing to the expected publication of first-quarter reports. In contrast, the period from May to October is often less positive, with first-quarter earnings having already been released and many investors spending less time paying attention to equities while on vacation.
Sectors Outperforming in Spring
JPMorgan’s Ilan Benhamou expects that, given the backdrop of worsening economic indicators, the US stock market would plateau in early March before recovering later in the Spring. He stated:
“In the short term, the situation is too chaotic, and the stock market will struggle to break through. I believe the market is stagnating. With liquidity improving, macro uncertainties easing, profits continuing to show resilience in USA businesses, losses stopping, and retail investors buying in again, I believe that in the medium term, the S&P 500 Index will rise and yields will decline.”
Knowing this, more than just select companies, investors would probably be more interested in knowing what sectors of the market outperform the others during the Spring season. Thankfully, CNBC already did the heavy lifting a while back. CNBC.com looked at stock performance over the past ten years and calculated the highest average gains during the spring months of March, April and May. Of all the stocks to achieve a gain of 20 percent or more, 27 percent were in the financial sector, while 21 percent were energy-oriented.
In 2024, financial stocks outperformed the market, surpassing all other sectors. Financial markets surged sharply and widely following President-elect Donald Trump’s victory in the 2024 presidential election. This spike was mostly driven by market confidence about a potentially more relaxed regulatory environment in 2025. Furthermore, Spring generally results in higher consumer spending as people receive tax refunds and engage in activities like home buying. This rise in spending may lead to increased loan demand and transaction volumes for banks and financial institutions.
Seasonal demand has a substantial impact on energy sector performance as well. One clear explanation for good spring performance is the seasonal availability of renewable energy producing sources. Toward the end of 2024, energy sector equities had significant volatility, gaining by more than 6% in November before falling over 10% in December. The broader market’s energy sector closed 2024 with a return of only 5.72%. Despite trailing the market last year, Spring may bring better fortune, as refineries ramp up gasoline output to match the expected increase in travel during the warmer months. This can lead to increased crude oil prices, which will boost the performance of energy equities.
Pixabay/Public domain
Our Methodology
To compile our list of the best spring stocks, we selected some of the best financial services and energy firms with the most hedge fund investors in Q4 2024, and then ranked based on hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Coterra Energy Inc. (NYSE:CTRA)
Number of Hedge Fund Holders: 48
Coterra Energy Inc. (NYSE:CTRA) is a natural gas company based in Houston, Texas. Founded in 1990 as the Cabot Oil & Gas Company, a subsidiary of then-parent Cabot Corporation, Coterra specializes in the development, exploration, and production of oil, natural gas, and natural gas liquids.
On February 27, JPMorgan announced an increase in the price target for Coterra Energy (NYSE:CTRA) shares to $36, up from $35, while keeping the stock’s Overweight rating. The revision followed Coterra’s announcement of significant oil and gas volume exceeding forecasts, as well as remarkable capital efficiency. Coterra recently provided an optimistic prognosis for 2025, but its shares have underperformed the XOP Index, falling by 100 basis points since the release. The initial 2025 oil production projection was lower than planned, owing principally to the delayed completion of Delaware Basin asset sales and the acceleration of several projects into the fourth quarter of 2024.
ClearBridge Mid Cap Strategy stated the following regarding Coterra Energy Inc. (NYSE:CTRA) in its Q4 2024 investor letter:
We exited our position in Coterra Energy Inc. (NYSE:CTRA), an independent oil and gas exploration and production company, following the company’s decision to acquire oil and gas assets in the Permian Basin in two transactions that we believe prioritize company size over operational efficiency.
9. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 55
Devon Energy Corporation (NYSE:DVN) is a prominent player in the United States energy market, specializing in the exploration, development, and production of oil, natural gas, and natural gas liquids.
On February 19, Mizuho Securities raised Devon Energy Corporation’s (NYSE:DVN) price target to $49 from $47 while keeping an Outperform rating. The change comes after the company announced its 2025 capital plan, which calls for 5% less investment and 2% higher output volumes than previously projected.
Devon Energy Corporation (NYSE:DVN) announced a 13% increase in adjusted earnings per share for the fourth quarter of 2024 compared to consensus projections. This result was attributed to a higher realized gas price of $1.46, which was significantly more than the $0.98 projection. The company also highlighted record production levels and successful cost efficiencies as a consequence of the Greyson Mill integration. In addition, Devon Energy emphasized the potential for higher revenue from associated gas, with gas revenues expected to more than quadruple year-over-year.
8. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 71
American Express Company (NYSE:AXP) is a leading bank holding company that provides a comprehensive digital payment network, including credit cards, charge cards, and financing options. The company’s premium brand is one of the primary reasons for its industry leadership.
In the fourth quarter of 2024, American Express Company (NYSE:AXP) recorded more than $17 billion in revenue, up 9% from the same period the previous year. Net income topped $2.1 billion, representing a 12% increase year-over-year. The bank also reached new milestones for annual Card Member spending, net card fee revenues, and new card acquisitions, issuing 13 million new cards this year.
On January 27, RBC Capital Markets reaffirmed its Outperform rating on American Express Company (NYSE:AXP) and raised its price target from $330 to $350. The change follows the company’s recent fourth-quarter results report, which RBC Capital examined and highlighted many critical performance metrics. American Express’s projection for 2025 was likewise optimistic, with RBC Capital citing a constant rate of revenue growth.
Bretton Fund stated the following regarding American Express Company (NYSE:AXP) in its Q4 2024 investor letter:
“American Express Company (NYSE:AXP) was our best performing stock last year, returning 60%, which was on top of 2023’s 29%. Its premium credit cards are more popular than ever, and its moderately affluent customer base continues to spend. American Express did especially well signing up younger cardholders, a great sign that its growth can be sustained for years to come. The combination of healthy revenue growth and tight expense control led to an earnings-per-share growth of 25%.”
7. Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Holders: 80
Schlumberger Limited (NYSE:SLB) is a global energy technology leader with four main divisions: digital and integration, reservoir performance, well construction, and production systems.
Schlumberger Limited’s (NYSE:SLB) revenues increased by 10% year-over-year in fiscal 2024, while adjusted EBITDA increased by 12%, resulting in $3.99 billion in FCF and a $571 million reduction in net debt. Following these results, Stifel analysts reaffirmed their Buy rating and price target of $59 for SLB shares, noting the company’s financial strength and potential to reward shareholders through share buybacks and dividend payouts.
SLB’s commitment to shareholder returns remains unwavering, as indicated by its goal of returning at least $4.0 billion to shareholders in 2025, following a payout of $3.3 billion in 2024. This goal is backed by the funds from Palliser’s sale and the company’s careful expenditure strategy.
ClearBridge Value Strategy stated the following regarding Schlumberger Limited (NYSE:SLB) in its Q4 2024 investor letter:
“Our largest sell was Baker Hughes, which we made to fund our new position in oilfield service provider peer Schlumberger Limited (NYSE:SLB). While we acknowledge that Baker Hughes has stronger near-term tailwinds, its strong performance has resulted in a historically wide valuation gap to Schlumberger. Schlumberger has similar exposure to the oil and gas industry, but also has an improving portfolio of assets and greater digital initiatives that we believe will lead it to outperform Baker Hughes over the long run.”
6. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 85
ConocoPhillips (NYSE:COP) is a global energy corporation located in Texas that explores, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids.
On February 10, Truist Securities analyst Neal Dingmann reiterated a Buy rating and a $139 price target for ConocoPhillips (NYSE:COP). Dingmann stated that ConocoPhillips intends to refine its portfolio with around $2 billion in asset sales. This strategic approach aims to improve the quality of the company’s assets. The analyst’s outlook is based on confidence in the company’s ability to strike a balance between expansion and capital discipline.
ConocoPhillips (NYSE:COP) delivered a solid performance in 2024 after closing the $22.5 billion purchase of Marathon in late November, adding high-quality, low-cost supply inventories to its portfolio. During the year, the company returned $9.1 billion in capital to its shareholders, which accounted for 45% of operational cash flow.
5. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 96
Wells Fargo & Company (NYSE:WFC), founded in 1852, is a notable financial services company that offers a wide variety of banking, investing, mortgage, consumer, and commercial financing products and services.
Wells Fargo & Company (NYSE:WFC) reported revenues of $20.3 billion in the fourth quarter of 2024, a slight 0.5% decrease from the same quarter the prior year. However, net income increased dramatically to $5.07 billion, up from $3.4 billion the year before.
On January 16, RBC Capital Markets raised its price target for Wells Fargo & Company (NYSE:WFC) to $80 from $72, while keeping a Sector Perform rating on the bank’s shares, citing Wells Fargo’s fourth-quarter earnings. RBC Capital also upgraded Wells Fargo’s EPS predictions, increasing the 2025 estimate to $5.85 from $5.50 and the 2026 expectation to $6.75 from $6.45. This adjustment includes projected greater net interest revenue and solid noninterest income, as well as lower expenditures, however a higher provision for credit losses is expected to partially offset these benefits.
4. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 104
Exxon Mobil Corporation (NYSE:XOM) is involved in the production, trading, transportation, and sale of crude oil, natural gas, petroleum products, petrochemicals, and specialized goods. The company intends to more than triple its Permian output and generate 1.3 million bpd from its very lucrative assets in Guyana. As a result, XOM anticipates an incremental growth potential of $20 billion in earnings and $30 billion in cash flow by the end of the decade.
Under its 2030 strategy, Exxon Mobil intends to invest up to $30 billion in low-emission activities between 2025 and 2030. Furthermore, it has worked with the Texas General Land Office to create the biggest offshore carbon dioxide storage facility in the United States.
RBC Capital maintained Exxon Mobil Corporation’s (NYSE:XOM) Sector Perform rating in December, with a $115 price target. The firm’s assessment acknowledged ExxonMobil’s objective of expanding its operations in the Permian Basin and Guyana, as well as its LNG business. Moreover, according to RBC Capital’s predictions, Exxon Mobil’s free cash flow yield will be 5.4% in 2025, increasing to 9% by 2030.
3. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 113
Bank of America Corporation (NYSE:BAC) is a financial holding corporation that provides a wide range of services such as savings accounts, deposits, wealth and cash management, investment funds, online banking, and other financial products.
The company recorded solid profitability in the fourth quarter of 2024, with revenues of $25.3 billion, up from $22 billion in the same time the year before. Net income more than quadrupled to $6.7 billion, up from $3.1 billion the year before.
Truist Securities began coverage of Bank of America Corporation (NYSE:BAC) on January 7, rating the company Buy and setting a price target of $52. According to the firm’s estimates, Bank of America is poised for growth, with net interest income (NII) predicted to increase by 4-5% and retail deposit growth to restart. This expected outcome marks a reversal of what was previously referred to be a “lost year” for positive operational leverage.
2. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 151
Mastercard Incorporated (NYSE:MA) is the world’s second-largest payment processor. The company offers its clients a variety of payment processing and related services, including credit and debit cards, data analytics, settlements, payment deferrals, and more.
Mastercard Incorporated (NYSE:MA) reported revenues of $7.5 billion in the fourth quarter of 2024, up 14% from the same period the previous year. Compared to the previous year, the company’s net income rose to $3.5 billion in the quarter. In addition, by the end of Q4, Mastercard Incorporated (NYSE:MA) had issued 3.5 billion MasterCard and Maestro-branded cards to its clients.
On February 13, Tigress Financial Partners maintained its Strong Buy rating on Mastercard Incorporated (NYSE:MA) and raised the price rating to $685 for the company’s shares. This revision reflects Mastercard Incorporated’s (NYSE:MA) stated growth and the assumption that the company would continue to benefit from the move to electronic payments and the rising demand for cybersecurity. The company’s rollout of Mastercard One Credential, which streamlines numerous payment choices for consumers, is also expected to increase market share.
Bretton Fund stated the following regarding Mastercard Incorporated (NYSE:MA) in its Q4 2024 investor letter:
“Visa and Mastercard Incorporated (NYSE:MA) kept doing their thing, increasing earnings per share by 15% and 12%, respectively, with their stocks returning 22% and 24%. We continue to closely watch the evolving payments space as it seems like everyone’s always trying to displace the card networks. For now, we don’t see anything gaining much traction.”
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 181
Visa Inc. (NYSE:V) is an American multinational payment card service company that provides a wide variety of associated services and products to its customers. The firm links about 4 billion account members to over 130 million merchants and 14,500 financial institutions in over 200 countries.
On February 21, UBS reaffirmed its Buy rating and $400 price target for Visa Inc. (NYSE:V) shares. The affirmation comes as Visa prepares for its first investor day since 2020, which UBS says will instill confidence in the company’s growth trajectory and compounding potential. Visa Inc. (NYSE:V) is expected to present investors with a more complete view of its business drivers, including detailed information on the development and size of its Value-Added Services subsidiary.
Baron FinTech Fund stated the following regarding Visa Inc. (NYSE:V) in its Q4 2024 investor letter:
“Favorable stock selection in Payments was mostly attributable to double-digit gains from global payment companies Visa Inc. (NYSE:V) and Fiserv, Inc. Visa was a top contributor after the company reported strong quarterly results and provided a positive outlook for the next fiscal year. Quarterly revenue growth of 12% and EPS growth of 16% exceeded Street expectations, and initial guidance for fiscal 2025 calls for continued double-digit earnings growth.”
While we acknowledge the potential of V, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than V but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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