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| Image Source: AI Imagine |
New York, NY — Savvy stock pickers who invested $10,000 in January and reinvested each month in the best performing S&P 500 stock would have $125,279 now, an Investor’s Business Daily analysis shows. That’s a staggering gain of 1,153% in just eight months.
The same $10,000 invested in the S&P 500 index itself would have grown to only $11,740, for a modest 17% return. While few investors could replicate picking the top monthly leader, the huge difference highlights the rewards possible for those who choose wisely, even in volatile markets.
The S&P 500 slipped 1.8% in August, snapping a string of five straight monthly gains. Still, 13 stocks in the index managed to rise 10% or more for the month. Cloud computing company Arista Networks led the pack, rocketing 25.9% higher.
Health care stocks also stood out, with Eli Lilly and Regeneron Pharmaceuticals making the top 5 S&P gainers for August. This shows investors continue seeking growth opportunities even as the overall market cools off.
2022’s Rocky Ride
Stock market gains have not come easy this year. After a strong start in January, stocks fell in February as concerns grew over Federal Reserve interest rate hikes to fight inflation. But the market rebounded for four straight winning months before stumbling again in August.
The year kicked off with the S&P 500 jumping 6.2% in January. Media stock Warner Bros. Discovery was January’s top performer, skyrocketing 56.3%. But February brought a pullback, with the S&P 500 dropping 2.3% as rate worries intensified. Still, some stocks bucked the downtrend, like biotech Catalent, February’s best performer with a 25.6% surge.
After treading water in March, stocks rallied again when optimism grew that the Fed had inflation under control. The S&P 500 jumped 6.5% in June, its best month this year. Cruise line Carnival was the hottest S&P stock, soaring 67.7% on rebounding travel demand.
Financial stocks led July’s gains, with Zions Bancorporation surging 42.4%. But momentum slowed again in August as yields on risk-free Treasuries climbed, giving stocks more competition for investor dollars.
Many investors worry about September, historically the worst month for stocks. The S&P 500 averages a 0.5% decline in September. But as August shows, rough markets don’t deter all stocks.
Top Performing S&P 500 Stocks Each Month
| Month Top Performing Stock Ticker Monthly Gain Sector | ||||
|---|---|---|---|---|
| January | Warner Bros. Discovery | WBD | +56.3% | Communication Services |
| February | Catalent | CTLT | +25.6% | Health Care |
| March | Intel | INTC | +28.7% | Information Technology |
| April | Chipotle Mexican Grill | CMG | +21% | Consumer Discretionary |
| May | Nvidia | NVDA | +36.3% | Information Technology |
| June | Carnival | CCL | +67.7% | Consumer Discretionary |
| July | Zions Bancorporation | ZION | +42.4% | Financials |
| August | Arista Networks | ANET | +25.9% | Information Technology |
Cloud computing company Arista Networks was August’s top S&P stock with its 25.9% surge. Demand for its cloud networking products has remained strong despite economic uncertainty.
Arista has now gained 61% in 2022 as enterprises continue rapidly transitioning to the cloud. Earnings growth has consistently topped 20% in recent quarters.
On August 1, analysts at Morgan Stanley named Arista a “top pick,” predicting strong upcoming results. The company also saw several price target hikes last month. Arista is benefitting as firms accelerate their cloud and AI strategies.
Runners Up: Health Care Stocks
Besides Arista, health care stocks dominated August’s top S&P gainers. Eli Lilly climbed 21.9% after delivering a strong quarterly report driven by diabetes and cancer drug sales. The company also raised its full-year earnings forecast.
Regeneron Pharmaceuticals jumped 20.3% in August after posting better-than-expected profits and raising guidance. The company’s top-selling eye drug Eylea saw revenue grow 17%.
Medical device maker Intuitive Surgical rose 11.5% after reporting surging robotic surgery procedures. Health care was one of the few sectors besides tech to see stocks thriving amid August’s downturn.
Takeaway for Investors
August’s stock market weakness reflects concerns over still-high inflation and rising interest rates. But savvy stock pickers were still able to find big winners last month.
Chasing monthly leaders may not be a sustainable strategy. But examining each month’s top stocks provides insight into where the growth opportunities are.
Rather than trying to time the market’s ups and downs, investors should focus on adding companies with strong fundamentals, innovative products and top industry positions. Buying fundamentally sound stocks during pullbacks further boosts long-term returns.
