The month of September is historically the worst for investor returns. The S&P 500 over the past four years has averaged a 5.8% decline in September. However, it's not just the S&P 500 that does poorly; so does the Dow Industrials, the NASDAQ, and the Russell 2000.
“While momentum usually overrides seasonal concerns, September is hard to ignore – it is the only month down on average,” CNBC reported comments from Frank Gretz of Wellington Shields in an Aug. 30 note to clients.
As I write this, all four indexes are down over 1% in early Tuesday morning trading. History appears to be ready to repeat itself.
On Tuesdays, I cover one or more Top 100 or Bottom 100 Stocks to Buy. Three of the top 100 stocks have jumped more than 20 spots higher in Tuesday trading. While the odds are against stocks doing well in September, these three look to buck the trend.
FreightCar America
First up is FreightCar America (RAIL), a micro-cap stock that manufactures freight cars. I would be lying if I said I was familiar with the Chicago-based business. Sometimes, however, the best buys are companies you stumble upon.
Here’s what FreightCar America’s investor relations site says about the company’s reason for being.
“At FreightCar America, our focus is squarely on crafting premium railcars, conversions, re-bodies and providing top-notch parts and service,” its website states.
It wants to be the best heavy equipment manufacturer in the railcar space. To that end, it first opened a manufacturing facility in Costanos, Mexico, in 2020. It expanded the plant several times over the next three years, including completing a fourth line in 2023. As a result, the facility is now 700,000 square feet and can build 5,000 freight cars a year. In addition, it can potentially create a fifth line to boost production by an additional 1,000 freight cars annually.
“Looking to the future, FreightCar America’s strategic decision to shift manufacturing to Mexico has set us apart and positioned us for sustainable and profitable growth,” said CEO Nicholas Randall in June, announcing the company’s 10,000th railcar. “Reaching this milestone continues to establish new standards for excellence as we realize the benefits of vertical integration and cost optimization over the coming year.”
It reported Q2 2024 results in mid-August. Its revenues were $147.4 million, 66% higher than a year ago. This revenue was from the delivery of 1,159 railcars, up from 760 in Q2 2023. Its adjusted net income was $6.3 million, more than triple the profit from a year ago.
Is it too late to buy? If the momentum it’s gained in 2024 continues, the company is only getting started regarding profitable growth.
ARS Pharmaceuticals
ARS Pharmaceuticals (SPRY) is another company that I'm unfamiliar with. However, it’s hard to ignore a weighted alpha of 136.10, almost double the stock’s performance over the past 12 months. It’s up 30% in the past month alone.
Why?
The biopharmaceutical company’s needle-free epinephrine nasal spray (Neffy) to treat Type I allergic reactions, including anaphylaxis, was approved by the FDA (Food and Drug Administration) on Aug. 9. Less than two weeks later, the European Commission approved EURneffy, the European version of its treatment for allergic reactions.
“Today’s approval marks an important moment for the severe allergy community in the EU and the first novel adrenaline delivery method in more than three decades,” said Richard Lowenthal, Co-Founder, President and CEO of ARS Pharma.
As an allergy sufferer, although my issues are not nearly as severe as the target market for Neffy and its European counterpart, it should come as a significant relief to these customers.
According to the company's presentation, after getting the FDA approval, approximately 40 million patients with type 1 allergic reactions in the U.S. have been diagnosed, with half of those patients diagnosed in just the last three years.
With a sales staff of more than 100, the company is calling on 12,500 allergy specialists to generate new business. The cost for an uninsured patient is $6.63 a month, half the cost of branded allergy shots and 38% less than generic options.
Anytime you have a product that saves people money while keeping them healthy, you’ve got a potential winner.
With over $218 million in cash on its balance sheet and no debt, it’s easy to see why the stock is up more than 115% in 2024.
Grupo Financiero Galicia
The last of my three Top 100 Stocks to Buy is Grupo Financiero Galicia (GGAL), an Argentinian financial services mid-cap whose shares are up 136% year to date.
I highlighted the stock and two others exhibiting unusually active options in early March. With a history dating back to 1905, the three founding families created a holding company in 1999. They control 54% of the votes.
As the company’s investor relations site states, the holding company owns Banco Galicia (banking), Naranja X (fintech app), Galicia Seguros (insurance), Galicia Asset Management (asset management), Inviu (investtech) and Galicia Securities (stockbroker).
At the time, I liked the July 19 $35 call strike with a Vol/OI ratio of 33.38x. The ask price was $1.10, and the down payment was just 3.1%. At the time, it was trading around $22.39.
I wrote on March 1, “You can double your money on the call with a $6.68 increase in its share price over the next 140 days."
“While the odds of its share price increasing by $13 over the next 20 weeks seems a bit much, half of that isn’t out of the realm of possibility.”
You would have made money on the trade even with a summer swoon.
Looking at its options for DTEs of about the same amount of time, say 136 days, you could bet on GGAL with a Jan. 17/2025 $50 call. Its ask price is $1.95, a 3.9% down payment on 100 shares. With a delta of 0.27402, you can double your money with a $7.12 (17.6%) increase in its share price by selling within 135 days.
It’s doable. I like the risk/reward proposition.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
