So much for a reprieve from selling last week. After starting off strong, U.S. markets rolled over midday Friday, dragging the S&P 500's losing streak to nine days. That's the longest losing streak for stocks in almost 36 years.
Anyone hoping for a "new month, new market" mindset in November isn't getting their wish. The silver lining to the black clouds surrounding the stock market is that while the selling has been drawn out, it hasn't been deep. The S&P is down approximately 3% in that nine-session decline.
Meanwhile, markets remain paralyzed ahead of Tuesday's presidential election. Implied volatility, measured by the VIX Volatility Index, has been blasting higher ahead of voting, while statistical measures of observed volatility in the S&P 500 have remained mostly flat. That's a signal that market participants are anticipating the possibility of a big post-election move lower, and pricing in the risk here.
That disconnect between expectation and reality in stock volatility could create some buying opportunities in a segment of stocks that's predisposed to outperform this fall. I'm talking about the "Rocket Stocks".
In case you're not familiar, Rocket Stocks is our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows.
In the last 373 weeks, our weekly list of five plays has outperformed the S&P 500's record-breaking run by 79.81%.
So, without further ado, here's a look at this week's Rocket Stocks.
Leading off our list this week is $60 billion diversified chemical and materials company DuPont (DD) . At a glance, DuPont has more or less mirrored the broad market from a performance standpoint, up about 3% on a price basis since the start of 2016.
But that stat is a little misleading; since bottoming back at the beginning of January, DuPont has been rocketing higher in a bullish trend that boosts this company's gains to 33%. That momentum isn't showing any signs of fizzling out yet this fall.
DuPont owns a massive portfolio of materials tech. The firm's labs have been the birthplace of well-known brand names like Kevlar, Nomex, Tyvek, and Corian. More recently, DuPont has been expanding its agrichemical business, becoming one of the key suppliers of crop seeds in the world. The firm's culture of heavy investment in R&D continues to be a critical component of DuPont's long-term success - research and development spending has grown by more than a third in the last ten years.
DuPont is a company in transition. The spinoff of Chemours (CC) last year ramped DuPont's agriculture revenues to 40% of total sales, and the pending acquisition of Dow Chemical (DOW) stands to dramatically shift the sales mix again.
Between the boosted agriculture business (now with freshly increased valuations thanks to M&A activity in the industry lately) and DuPont's hugely successful advanced materials unit, this firm looks attractive as a long-term holding. With rising analyst sentiment in shares this week, DuPont is achieving Rocket Stock status for the first time this year.