Best Stocks to Buy Before July

These equities tend to outperform in July and the third quarter

by Andrea Kramer

Published on Jun 26, 2019 at 11:29 AM

June has been a banner month for the U.S. stock market, with the S&P 500 Index (SPX) on pace for its best month since January, and assailing fresh all-time highs. What's more, several stocks could extend their summer gains into July and the third quarter, if recent history is any guide. Among the equities that tend to heat up is drugmaker Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), which also just flashed a bullish signal on the charts.

Below are the 25 best SPX stocks to own in July, looking at historical returns over the past decade. To make the list -- cultivated by Schaeffer's Senior Quantitative Analyst Rocky White -- stocks had to have at least eight years' worth of returns. As you can see, Alexion stock tops the list, ending July higher 100% of the time with an average gain of 10.68%.

best july stocks

In addition, ALXN popped up on our list of best stocks to own in the third quarter. The pharma stock has ended the three-month stretch higher 90% of the time, with an average quarterly gain of 13.63%.

best 3Q stocks

The shares of ALXN started 2019 red-hot, rallying from their Dec. 24 low of $92.56 to a new annual high of $141.86 by April 10. The security subsequently pulled back to the $115-$117 area -- which represents a 50% Fibonacci retracement of that rally -- and bounced. In addition, the stock is back within one standard deviation of its 80-week moving average, after a lengthy stretch above this trendline.

Over the past 15 years, there have been 11 similar pullbacks to this moving average, after which ALXN was higher an average of nearly 13% three months later, per data from White, and was positive 90% of the time. From the stock's current perch around $123.78, a similar jump would put Alexion shares just under $140 -- back near recent highs.

 ALXN stock chart june 26

However, it should be noted that near-term ALXN option premiums are relatively expensive right now. The stock's Schaeffer's Volatility Index (SVI) of 61% stands in the 97th percentile of its annual range, suggesting short-term options are pricing in elevated volatility expectations.

Against this backdrop, traders expecting another red-hot summer for Alexion shares may want to consider selling to open puts, as opposed to buying to open calls. More specifically, bulls would write a put that coincides with expected support for ALXN stock; if the equity ends atop the strike when the option expires, the put will be rendered worthless, allowing the sellers to retain the entire premium received from the sale.


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