The Best Stock for a December Sector Comeback By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - A new month means a new look at the data…
- The best-performing sector in December…
- And the best-performing stock in that sector…
- Jason Bodner’s Power Factors find you the best small- and mid-cap stocks …
There’s no better time to study market data than right now… As each month closes out, we get to look back at which sectors and stocks outperformed… giving us a strong focal point for the month ahead. Monthly changes are significant. Psychologically, we close the books on the previous month and open them on another. Our instinct is to want to do something different… and do better than what we did before. This is a great time for that. We happen to be entering December, historically one of the best-performing months during the best-performing period of the year. Since 1945, the S&P 500 has returned an average of 1.6% in December, matching the return of the other best-performing month, April. Let’s start on sectors, both over the last month and from the start of the year. Our advice to “always remember to buy in November” clearly paid off. The election clouds parted, and clarity gave way to solid performance across nearly all sectors. While the S&P 500 was up just over 3% over the past month, here’s where the sectors stacked up: 
The weakest parts of the market in October, which closed red and saw all but three sectors lose money, continued to underperform in November. Consumer Staples, Real Estate, Materials, and Health Care ranked bottom in November. Information Technology stocks also failed to beat the S&P 500 over the last month. At the top, Consumer Discretionary stocks made a big comeback. They lost -1.74% in October but gained more than 10% in November on a wave of speculative optimism. As for the best-performers in October – Communications, Financials, and Energy – all but the latter kept the top spots in November. And looking at the latest year-to-date figures… Financials, with their strong November performance, have unseated Communications and formerly Utilities as the best sectors of 2024. Health Care still graces the bottom… and while Energy has gained some ground, Real Estate and Materials continue to lag: 
Now, let’s look ahead. Which sectors historically post the best returns in December? 
Well, would you look at that. The worst-performing sector of 2024, Health Care, has the highest odds of trading positive in December. Not only that, it has the second highest average return (counting wins and losses) of 2.29% and a respectable 3.76% average winning trade. And two of the best trades of 2024, Utilities and Communications, have far worse win rates at 52% and 60%, respectively. (Granted, the Communications ETF has only traded for five years.) Let’s get even more granular… Want to optimize the historical strength in Health Care stocks? We got you. Of the top 10 stocks in the Health Care Select Sector SPDR ETF (XLV) by weight, let’s look at which will be statistically the best to own in December: 
Danaher (DHR), which has traded all over the board in 2024 and currently sits at a 2.5% gain on the year, has the highest win rate among the top brass in the XLV ETF. Over 44 years of data, DHR has closed December positive almost 73% of the time. Mind, also, the steep losses it has suffered. It has the highest average loss among the group… in exchange for the second highest average gain at 8.85%. There are higher risk, higher reward plays in the group above, too. Amgen (AMGN) is only positive 57.5% of the time but posts an average return of 5.47% and an average positive return of 12.53%. Betting on Health Care in December may be contrarian after its disappointing 2024. But the data is on your side. We’ll be sure to check in on Health Care stocks in the new year and see how they fared. And let’s look at a few more December ideas… In addition to loving the start of a new month, I’m an equally big fan of Mondays. Mondays are when Jason Bodner drops his new Quantum Edge Hotlist – the top-rated stocks spotted by his quantitative stock-picking system. As we’ve shared before, this system optimizes for three Power Factors: sales and earnings growth, share price appreciation, and unusually strong buying volumes. Historically, holding a portfolio of top-ranked stocks that show these characteristics beat the S&P 500 by 7-to-1 since 1990. (Regular readers may remember this stat as “6-to-1.” Let’s just say 2024 was a banner year for Power Factor stocks.) And every week, Jason sends the freshest rankings to his Quantum Edge Pro subscribers. That list will make its way to inboxes later today. Meantime, let’s check in on last week’s list. It cannot be overstated how bullish it is to see stocks appear in the Quantum Edge Hotlist again and again. This week we see top-ranked stalwarts Apollo Global Management (APO) and Arista Networks (ANET) still taking the top spots and jockeying for first and second place: 
SEI Investments (SEIC) climbed in the list last week, more evidence of financial stock strength… so did Gen Digital (GEN), a sign that the tech trade has shifted squarely into software… plus language learning app Duolingo (DUOL) is a new addition to the top 10, and I can personally attest to that app’s addictiveness. Biopharma stocks continue to rank near the bottom of the list, with Intellia Therapeutics (NTLA) showing up for yet another week and now joined by lesser-known names Avadel Pharmaceuticals (AVDL) and Structure Therapeutics (GPCR). Magnera (MAGN), a materials company previously known as Glatfelter before merging with Berry Global, ranks the worst in Jason’s system. (Pre-merger Glatfelter was the worst stock last week.) I doubt you own any of the bottom-ranked stocks, saved for Intellia, which was a former genetic editing darling. Similarly, though, I doubt many individual portfolios that don’t follow Jason hold many of the top-ranked stocks. They aren’t exactly household names. That’s because Jason specifically targets up-and-coming stocks – the small- and mid-cap ones with the potential to graduate into large-cap size in a matter of years. That can’t happen without those Power Factors… and that’s why Jason prioritizes them in his research. If you don’t already subscribe to Jason’s work, now’s a good time to change that. If the winds keep blowing bullish in 2025, and interest rates continue to drop, Jason’s small- and mid-cap ideas stand to soak up a big chunk of the capital rotating into those spaces. And here’s a little-known fact for you. Out of the three key Standard & Poor’s indexes, mid-caps are the highest-returning group of the past 32 years: 
Where the S&P 500 has returned a respectable 1,447%, it pales in comparison to the small-cap S&P 600’s 2,200% return or the mid-cap S&P 400’s 2,463%. That’s because stocks in these classes have escaped micro-cap territory the only way a stock can – by growing. And mid-caps are an excellent place to be as the transitional period between small- and large-cap. Chances are, if you’re there, you’re growing quickly. Learn more about how Jason targets the best of the best of these stocks right here. To your health and wealth,  Michael Salvatore
Editor, TradeSmith Daily P.S. Jonathan Rose’s breakthrough One-Day Winners presentation goes offline this week. As I understand it, it’ll be down in the next 48 hours. In this presentation, Jonathan showed how zero-day options trading can simultaneously reduce your risk and raise your percentage gains by strategically trading spikes of volatility. This kind of trading isn’t for everyone. But if you have a penchant for trading in the short term, it doesn’t get better than Jonathan’s research. In the case studies he’ll share, you’ll see how his short-term options trades have given folks in his community: - Gains of 100%, 161%, and 229% in one day after Donald Trump won the election…
- Zero-day gains of 856%, 1,113%, 3,800%, and even more on a 2% Nasdaq 100 move…
- And 477%, 1,665%, and 1,820%… in just seven hours after the Federal Reserve’s half-point interest-rate cut.
Check out the replay of last week’s live presentation right here, and learn which area of the market Jonathan and his subscribers targeted with a one-day trade in last Friday’s short session. | 
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