Stock market bears have roamed Wall Street in October, leading to the biggest sell-off since February. The Standard and Poor's 500 Index (S&P 500) is down roughly 7% so far this month as of Oct. 26 on fears over rising interest rates, trade wars, slower economic growth in China and weaker earnings growth.
Furthermore, there's little technical support on the S&P 500 until the 2,600 level, which indicates that there may be further downside ahead. "We traded down there and were just below 2,600 in late March, early April. We tried again in early May, so it seems like that 2,600 at least for now is what the market wants to test," Peter Boockvar, chief investment strategist at Bleakley Advisory Group, told CNBC.
Despite a sea of red across the tape, three consumer goods stocks have made year-to-date (YTD) highs in late October. Those who favor investing in companies that show relative strength to the broader market should add these stocks to their watchlist. Let's look at why these names are outperforming and at what price to buy them.
P&G, the world's largest consumer goods company, manufactures household supply products as well as cosmetics and personal care products. The company's share price made a YTD high of $90.7 on Oct. 24 – three trading days after the company released an upbeat fiscal first quarter earnings report. Investors also appear to be impressed with the direction that CEO David Taylor is taking the company, such as discontinuing unsuitable brands for P&G's portfolio and focusing on data-driven advertising.
Investors who wish to buy P&G shares should look for retracements to the $85 level, where the stock is likely to find support from the September swing high and Oct. 19 earnings gap low. To help time the entry, wait for the relative strength index (RSI) to return to the 50 area. A stop-loss order could sit just below the October swing low to protect trading capital.
Headquartered in Baltimore, Maryland, McCormick manufactures, markets and distributes seasoning mixes, spices and condiments. After initially selling off following an earnings report on Sept. 27, the stock hasn't looked back. McCormick stock made a YTD high of $143.62 on Oct. 24 before reversing to close near its opening price to form a doji candlestick. Although McCormick slightly missed revenue forecasts, the company raised its full-year earnings outlook based on lower tax rates and strong growth momentum. The company's 2017 acquisition of Reckitt Benckiser's Food Division (RB Foods) continues to pay dividends and support a buoyant share price.
McCormick's stock price has trended sharply upward since its June 28 earnings call. Investors should look to buy the stock on a pullback to the uptrend line at the $135 level. Consider placing stops under the 50-day simple moving average (SMA) or below the Sept. 27 low to allow for more wiggle room.
Headquartered in Oakland, California, Clorox is a Fortune 500 company that manufactures and sells an extensive range of both consumer and professional products – from bleaches to water-filtration systems. Clorox stock climbed to $155.23 on Oct. 24 – its current YTD high. The stock has remained in a steady uptrend since Aug. 2 after the company exceeded analysts' fourth quarter earnings expectations. CEO Benno Dorer has worked hard to cut expenses and increase prices to offset higher logistics and commodity costs. These initiatives along with a 2.51% dividend yield help explain the stock's recent outperformance.
Rather than chasing the stock, investors should wait for a retracement back to the uptrend line at the $145 level. A stop-loss order could sit beneath the low of the Aug. 2 earnings gap candlestick to close a losing trade.