Outperformance Possible After Strong September

It may seem like a distant memory, but the S&P 500 Index (SPX) closed out September with a 3.5% gain. It was the strongest September performance in 15 years and sent the market to new highs.

Here’s why that matters: history shows that after strong Septembers, the fourth quarter tends to outperform in a big way. In other words, more highs are likely ahead.

Strong September Bucks History

Usually, September is on the weak side. There have been deep dips, including in the last 20 years:

But as you can see above, that didn’t happen this year. September’s 3.5% gain was the best in 15 years.

It’s also clear above how these surprises aren’t common. Going back to 1990, September has gained 3% or more just eight times. Some of the bigger September gains occurred in 2009, 2010, and 2013:

And the market climbed higher.

This looks bullish because it is. Typically, the fourth quarter is the best quarter of the year. Since 1990, the S&P 500 averages a return of 4.91% in the fourth quarter.

That’s great, but it gets better.

When September gains 3% or more, the fourth quarter averages a gain of 7.63%:

That’s a 55% increase in outperformance!

Big Money Support

Don’t forget about market rotations though – they’ve been prevalent in October. However, companies with earnings excellence and increased guidance draw Big Money support.

One stock that’s been a Big Money star is Micron Technology, Inc. (MU). MU offers memory and storage solutions for AI networks, mobile, and embedded systems used by corporate and individual customers globally.

I wrote about it a couple weeks ago. The fundamental profile is strong:

• 3-year sales growth rate (+20.3%)
• 3-year EPS growth rate (+409.2%)
• 1-year EPS growth estimate (+15.9%)
• Increased EPS guidance to $3.90 (upper range) from $2.96
• Increased revenue guidance to $12.8 billion (upper range) from $11.9 billion

Source: FactSet

No wonder Big Money has been buying so much over the last year:

And in the last six months, Big Money has been buying in outsized chunks:

But it’s important to note MU has been a Big Money favorite for a while:

Clearly, Big Money inflows have been a growth catalyst for MU. And it’s still happening today.

Built To Find the Flows

If the fourth quarter is to outperform as history suggests, then loads of individual stocks (like MU) will need to flourish. They’ll be the ones with strong fundamentals, growing guidance, and Big Money support.

MoneyFlows can help you spot these winners attracting the Big Money. Our platform is purpose built to find the flows.

If you are a Registered Investment Advisor (RIA) or a serious investor, take your investing to the next level and follow our free weekly MoneyFlows insights.

Disclosure: the author holds no position in MU at the time of publication.