We recently compiled a list of the 10 Best Stocks to Buy Before Spring. In this article, we are going to take a look at where ConocoPhillips (NYSE:COP) stands against the other 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.
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).
An underground network of pipelines transporting oil through an expansive terrain.
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.
Overall COP ranks 6th on our list of the best stocks to buy before spring. While we acknowledge the potential of COP as an investment, 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 COP 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.
Disclosure: None. This article is originally published at Insider Monkey.