25 Stocks That Could Rally In October

September was a wild ride, as stocks emerged from their post-"Brexit" slumber in time for the Fed's much anticipated policy meeting. However, the historically third-worst month of the year is quickly coming to a close, with October -- the best month of the year for the S&P 500 Index (SPX), on average -- just around the corner. Against this backdrop, we take a look at 25 stocks -- and three sectors -- that could heat up in the next few weeks, if history is any indicator.

First, let's back up our seasonality stats. Over the past 20 years, the SPX has averaged a loss of 0.3% in September, ending positive 55% of the time. That's behind only August and January, which average losses of 1.2% and 0.5%, respectively. October, on the other hand, averages a gain of nearly 2.1% -- the best of any month -- and is positive 70% of the time. Be careful, though, as the standard deviation is also the highest, suggesting stocks are more prone to volatility.

Moving on, to find the historically best stocks in October, Schaeffer's Senior Quantitative Analyst Rocky White looked at SPX components over the past decade, and eliminated equities with fewer than eight returns. The sectors that stood out to me were exchange operators and credit cards (both lumped under the "Finance" umbrella), as well as airline stocks.

Exchange operators

Intercontinental Exchange Inc (NYSE:ICE) and Nasdaq Inc (NASDAQ:NDAQ) are literally at the top of the list, ending October higher nine of the past 10 years. ICE has generated the slightly better return, on average, gaining a cool 7.7%. NDAQ isn't far behind, though, averaging an October return of 7.4%. ICE has added 5.7% in 2016 and is just off an all-time best of $287.02, tagged earlier this month. NDAQ is also not even a month off a record high -- $71.92, notched Sept. 2 -- and boasts a year-to-date gain of 17.2%.

Credit card issuers

Mastercard (NYSE:MA) is third on the list -- and only by a very small margin -- boasting an average October gain of almost 7.4% during the past decade. The stock has ended October higher nine times out of 10, and just notched its own all-time best of $102.23 not even a week ago. Visa Inc (NYSE:V) also made the cut, but is further down the list. The stock has averaged an October gain of 5.6% over the past eight years, and has been positive 88% of the time. Not to be outdone, the Dow component scored a record high of $83.79 on Sept. 22.

Airlines

Delta Air Lines, Inc. (NYSE:DAL) has given up more than 22.7% so far in 2016, struggling since an August bear gap. However, DAL actually averages the best October gain of the bunch, at 13%, but as it's been trading since just 2007 (not a full 10 years), it's near the lower end of the list. Likewise, it's been a bumpy ride for Alaska Air Group, Inc. (NYSE:ALK) of late, with the stock down almost 18% year-to-date. However, things could heat up in October, if ALK enjoys a repeat performance. The security has ended October in the black eight of the past 10 years, averaging a very healthy gain of 9.5%.

 

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