The month of September has been known to be a difficult one for investors. That’s because, over time, it’s been the worst month of the year for stocks — a phenomenon known as the September Effect. Of course, this doesn’t mean every September produces declines. Last year and the year before, the month of September delivered gains of 3.5% and 2%, respectively.
Still, investors have become more cautious in recent weeks amid the S&P 500‘s more than three-year climb and as valuations reached a new high. They’ve worried that higher inflation could weigh on the consumer’s wallet and that this, along with tech companies’ spending on artificial intelligence (AI) may hurt corporate profits. This backdrop could put pressure on the S&P 500 in the coming weeks.
With this in mind, let’s check out three stocks to buy and hold even if there’s a stock market sell-off in September.
Image source: Getty Images.
1. Costco
Costco (COST +0.27%) has what it takes to maintain steady earnings growth in any economic environment. This warehouse giant offers customers essentials such as food and gas at rock-bottom prices, so it’s a key destination when times are tough. In fact, during such a period, customers may shop even more at Costco to take advantage of deals and amortize the membership fee.
And this brings me to another important point. Costco generates most of its profit from these fees, so the company makes money before shoppers even set foot in a warehouse to shop. That’s one big advantage. The second is the fact that Costco’s renewal rate in its biggest market — the U.S. and Canada — has been steadily higher than 90%. So membership revenue is something investors can count on, offering them visibility on earnings down the road.
Costco generally trades at a premium compared to other retailers, but today, valuation has come down, leaving it close to the level of Walmart. This is a great time to scoop up the stock and hold on for the long term.
COST PE Ratio (Forward) data by YCharts
2. Amazon
Amazon (AMZN +1.94%) is another player that’s likely to do well amid economic pressures. Like Costco, it offers consumers low prices on goods they need — on top of this, they can shop from the comfort of their own home. This is a model that’s worked well for the company over time, with annual revenue growing to a high of more than $700 billion in the most recent year. Amazon’s expansion into pharmacy, as well as the company’s commitment to fast delivery, has reinforced its popularity among consumers.
Today’s Change
(1.94%) $4.89
Current Price
$256.78
Key Data Points
Market Cap
Day’s Range
$253.14 – $257.59
52wk Range
$196.00 – $287.20
Volume
26.7M
Avg Vol
47.1M
Gross Margin
50.77%
Amazon is also benefiting from its presence in the AI space thanks to its Amazon Web Services (AWS) business. AWS is generating tremendous growth as it furnishes customers with a variety of AI products and services, including Amazon’s own in-house-designed chips. In the most recent quarter, AWS reached an annual revenue run rate of $169 billion.
Today, Amazon trades for 20x forward earnings estimates, a steal — this, along with its leading e-commerce and cloud businesses, makes it an excellent long-term stock to buy right now.
3. Target
Target (TGT +0.06%) has reached a key period of transition. The retailer struggled to grow in recent years amid various challenges, but now is taking important steps along the recovery and growth path. Longtime executive Michael Fiddelke took on the chief executive officer role earlier this year and set out a plan — in the recent quarter, progress is already apparent.
During the three months, Target completed its biggest volume of merchandise resets in more than 10 years. The company also gained ground in its use of AI and in supply chain productivity, and over the past year, the retailer cut prices on more than 10,000 items in an effort to reinforce affordability. In the quarter, revenue advanced about 5% to more than $26 billion, and the company reported traffic growth of 3.6%.
Today’s Change
(0.06%) $0.10
Current Price
$155.83
Key Data Points
Market Cap
Day’s Range
$154.35 – $157.37
52wk Range
$83.44 – $170.75
Volume
2.6M
Avg Vol
4.3M
Gross Margin
26.83%
Dividend Yield
2.94%
Target shares remain at a reasonable valuation, at 15x forward earnings estimates, and the retailer’s focus on price as well as merchandise assortment should help this recovery story gain momentum. That’s why it’s an excellent stock to buy and hold even if the market sells off this month.