3 Best Performing Stocks of October in Focus - Analyst Blog

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October started off as a pretty weak month for stocks. Securities sold off thanks to the impact of a government shutdown and a possible government debt default. Fortunately, republicans and democrats came together enough to find a short-term compromise.

This, along with a pretty solid earnings season, was enough to lift the broad markets throughout October. In fact, the S&P 500 finished the period up about 4% for the time frame, pushing the YTD gain for the key benchmark above the 20% level.

Yet while the S&P 500 did pretty well in the month, a few stocks blew the doors off of this four percent gain. In fact, there were a handful of decent sized companies (market cap above $500 million) that gained more than 50% in the month.

Below, we highlight three such companies, any of which could be worth a closer look by momentum investors, or those looking for companies that may have overextended themselves as of late:

Solar City ( SCTY )

The trend in the solar power industry has been pretty solid lately, with a number of companies surging. Consumers appear to be embracing the product in droves, while a rebound in foreign markets is also helping sentiment.

Solar City focuses on rooftop solar installations, using a leasing approach. This means that customers generally pay little to nothing up front, and instead pay SolarCity lease payments . This provides SCTY with a solid revenue stream, and if recent growth is any guide, users seem to like this approach too.

Though the company is expected to lose money both this quarter and this year, estimates have been moving higher as of late, while the year-over-year growth currently stands at 67% for the current year. And with a solid beat from First Solar in their latest report, there is plenty of hope that SCTY can be another company to deliver in this earnings season.

However, investors should note that SCTY has already had quite the run, as the stock has appreciated by 55.2% in October alone. The stock does carry a Zacks Rank #3 (Hold), though the solar industry is in the top 25% so more gains may be possible.

AMR Corp ( AAMRQ )

AMR Corp, the parent for American Airlines, has had an interesting run lately. The company has had to fight through significant turbulence as its planned merger with US Airways-to create the world's largest airline-was rejected by the Department of Justice.

Now there is some hope that the company can reach a settlement and combine, hopefully producing efficiencies for the airline. Speculation of this happening has helped to boost the price of AAMRQ significantly as of late, and within striking distance of its 52-week high.

Our consensus estimate has also moved higher lately, going from $2.20/share to $2.40/share in just the past two months. And for the current quarter, growth is expected to be quite strong year-over-year as well, helping to keep this stock at a Zacks Rank #1 (Strong Buy).

Still, AAMRQ shares have taken off lately, adding more than 60% in just October, suggesting that many traders and investors believe that the deal will go through. It is also worth noting that airlines have a pretty strong industry rank, so there is definitely reason to still be bullish, particularly if oil prices continue to tumble.  

Education Management Corp ( EDMC )

EDMC ended October on a pretty weak note, falling by over 7% on Halloween. It doesn't really matter too much for longer term investors though, as EDMC has surged by over 74% in the month.

This stock, which is in the for-profit education industry, was boosted by some of the recent positive news in the space. Recent asset sales by Career Education boosted prospects across the sector, while many education names were already beaten down, so part of the surge has to be some bottom-fishing as well.

The stock currently has a Zacks Rank #2, but it did guide below the consensus. It did keep the 2014 EPS guidance in-line , but the best might be over for EDMC for now, especially if the estimate trend starts to go lower.

Bottom Line

Even with the market volatility at the beginning of the month, stocks did pretty well in October. And with a solid earnings season and a lack of negative catalysts on the horizon, we could see a decent end to the year too.

Just note that even with this decent performance, several stocks thoroughly crushed the market during the time frame. These stocks added more than 50% in the month, and were the real winners of the solid trading in October.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AAMRQ , EDMC , SCTY

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