It can be difficult to think about momentum stocks when the market is sinking. That’s especially true heading into September, which is traditionally the worst month of the year for stocks.
But while the major indices continue to trend lower, there are a number of stocks that are outperforming and actually rose during August and heading into September. There are also indications that the momentum behind many of these stocks could continue in the coming weeks and months despite continued macroeconomic headwinds that are pushing against the market.
While momentum stocks are not always easy to spot, investors stand to gain handsomely if they can find these diamond-in-the-rough names. Whether it has been strong earnings, positive forward guidance, sector strength, or a combination of all these factors, these stocks have managed to post gains for shareholders in an extremely difficult environment.
As we approach Labor Day, we offer up three of the best momentum stocks to buy for September.
Devon Energy (DVN)
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There are a lot of reasons to be bullish on Devon Energy (NYSE:DVN) right now. In August, while the S&P 500 index fell 5%, DVN stock gained 11%, bringing its 2022 advance to 50%. Buoyed by higher prices for oil and natural gas, Oklahoma City-based Devon Energy’s share price has climbed 21% in the last month and 58% in the last 12 months.
The company is primarily involved in oil and natural gas exploration, and has proven reserves of 1.6 billion barrels of oil equivalent, of which 44% is petroleum, 27% natural gas liquids, and 29% pure natural gas.
Devon Energy is getting a major boost this year from oil prices that have been as high as $130 per barrel at times. The company most recently reported that its second-quarter earnings had soared 332% from the same quarter a year earlier, due primarily to elevated energy prices.
Its Q2 revenue jumped 133% versus the same period of 2021. And if all this isn’t enough to entice investors, consider the dividend that’s attached to DVN stock.
Currently, Devon Energy is paying a quarterly dividend that yields 6.85%, or $1.17 per share. Compare that to the average dividend yield of 1.69% among S&P 500 companies, and DVN stock looks very attractive indeed.
Dicks Sporting Goods (DKS)
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September is the back-to-school month, and that is good news for Dick’s Sporting Goods (NYSE:DKS) and its shareholders. Heading into September, DKS stock increased 11% in August as strong earnings and anticipation of back-to-school shopping bolstered the share price. Now trading at $108 per share, Dick’s Sporting Goods’ stock is down 6% year to date, outpacing the S&P 500 index that is down 17% since January. With a price–earnings (P/E) ratio of 9.3, Dick’s stock also looks extremely affordable. And its dividend payout that yields nearly 2% helps too.
The Pennsylvania-based company recently reported strong Q2 results and lifted its outlook for the remainder of this year, which had Wall Street analysts singing its praises. The company’s Q2 EPS came in at $3.68 versus the $3.58 that had been expected, on average, by analysts. The retailer’s Q2 revenue in the quarter amounted to $3.11 billion compared to the average forecast of $3.07 billion.
For the entire year, Dick’s said it now expects EPS of between $10 and $12, up from a previous forecast of $9.15 to $11.70. Equally impressive, management has said that DKS is able to manage inflationary pressures without losing customers. That was music to investors’ ears.
Meta Platforms (META)
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We should have a tech stock on this list, and Meta Platforms (NASDAQ:META) looks to have some momentum behind it after a very difficult start to the year. The shares of the parent-company of Facebook appear to have found a bottom right around $155 per share, and they have been creeping above that level, trading at $165 today.
During August, META stock gained 1% compared to a 6% decline in the technology heavy Nasdaq index during the month. While the company works to build the “Metaverse,” it can still rely on Facebook, which has monthly active users of 2.93 billion, including its Messenger service.
Add in the social media sites that Meta also owns, such as Instagram and WhatsApp, and the number of monthly active users swells to 3.65 billion people, or 45% of the 8 billion people on Earth. While the company’s earnings have been hurt this year by a decline in online advertising, those dollars are starting to return and will eventually exceed pre-pandemic levels.
Another reason to like META stock is its valuation. With a current P/E ratio of 13.5, Meta Platforms’ stock is the cheapest among the mega-cap technology names that include Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). In fact, Meta’s stock now has a lower P/E ratio than either McDonald’s (NYSE:MCD) or Starbucks (NASDAQ:SBUX).
On the date of publication, Joel Baglole held long positions in AAPL and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.