In 19 trading days in October so far, there have been 13 days when the Dow closed with a triple-digit move – four higher and nine lower. Seven of them had moves greater than 1%. Compare that to 2017, when there were just 10 single-day moves of 1% the entire year.
It’s no wonder investors are nervous.
But history shows that this is par for the course for October. While September usually gets the rap as the worst month for investors, October is actually the month with the most volatility.
But the good news is that we often see major bottoms form this month after the big sell-offs. And there is one more bit of good news to keep in mind. October starts the winter half of the year, when the lion’s share of gains in the stock market are made.
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Remember that old saw to “Sell in May and go away?” Well, while not quite as fun to say, October is the time – historically – when we are supposed to buy them back.
And that’s why we’re bringing you the best stock to buy and hold in October, when the markets are particularly volatile…
Riding the Storm Out with the Best Stock to Buy and Hold
Even though history is now on our side, it’s not guaranteed that the volatility will end soon. Investors need a strategy, or at least a few good stocks to buy, that will hold their value and even move higher while the rest of the market sorts itself out.
While the big momentum-driven stocks dragged the market lower, they took stocks of companies with solid balance sheets and that operate on steady, sound financial principles with them. This is actually great news because they are now more attractively valued and are financially capable to weather the current storm to come out strong on the other side.
One of our favorites is not an obvious pick. It is a financial stock, and in a world where the U.S. Federal Reserve is bent on raising interest rates, it seems rather counterintuitive.
It is not a bank where rising rates squeeze margins. But it is in a position to capitalize on the current wave of fear running through Wall Street.
In fact, the more other people panic and churn their portfolios, the better it is for a broker like Charles Schwab Corp. (NYSE: SCHW).
It’s a solid firm that has always offered the lowest prices, the highest-quality service, and has been operating with quiet integrity in both good times and bad. That’s why the number of accounts it held actually increased during the financial crisis of 2008-09.
No wonder it was just flagged by our Money Morning Stock VQScore™ system, indicating that it is undervalued and due for a rebound. In fact, this one might be undervalued by as much as 50%!
Schwab was a pioneer in discount trading, and it’s still the leader in that category.
Whether you’re buying $100 or $10,000 worth of stock, the fee for an online account at Charles Schwab comes in at a flat rate of just $4.95. And the expense ratios on its index funds (0.03% for the S&P 500) beat out its top competitors.
The combination of low prices and high-quality service allowed the company to grow to a market cap of $66 billion. It has 11.3 million accounts totaling about $3.6 trillion – with a t – in assets. That’s 7% of all the available assets to invest in the United States.
But the company offers much more than just execution of stock trades. Schwab helps clients find advantages through personalized financial planning, asset allocation, and tax efficiency. Any dollar not spent on a commission is no different from a dollar gained with a higher-priced broker.
It also keeps up with the latest in technology, so much so that it is nearly a fintech (financial technology) firm in its own right.
Schwab’s asset base has tripled under current CEO Walter W. Bettinger, III, with the client base growing more than 50%. And more than half of the new retail accounts have been opened by people under the age of 40 – a sign that Schwab is very much in step with the changing times.
The firm has been a leader in digital innovations, like its AI-powered Schwab Intelligent Portfolios, which can efficiently offer sound investment advice for most retail clients.
For two years in a row, J.D. Power has ranked it the highest in investor satisfaction among full-service brokerage firms. It was named one of the world’s most admired companies in 2017 by Fortune. And Investor’s Business Daily ranked it No. 1 among online brokers in customer service and trade reliability.
It shows that the company has not deviated from founder Charles Schwab’s philosophy: “We will survive if we do the right thing for people. We will collapse if we ever deviate from that mission.”
And it paid off on the bottom line.
Earnings per share has grown every year since 2012 and is on pace to soar 52% this fiscal year. According to FactSet, that growth is projected to continue through at least 2021.
Schwab has also boosted its pre-tax profit margin in each of the last four years, growing it from 31.4% to 42.4% in that time.
Its forward price/earnings-growth (PEG) ratio – which would be 1 for a fairly priced stock – comes in at just 0.8, suggesting a rise of 25%.
But looking back to its growth in the last 12 months, Schwab’s PEG comes in at 0.53.
That means this stock could double in value based on its past growth alone.
No doubt, October has been trying for investors. But quality stocks will rise from the ashes, and more likely than not, they will lead the way higher when conditions stabilize.
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