On Sep 14, the U.S. market’s broadest benchmark homed in on the crucial 2,500 mark during a relatively quiet session of trading. This was the second successive record close for the S&P 500, a feat matched by the two other primary gauges of market performance. Of course, underneath the cautious optimism, wariness about a near-term pullback continued to linger. 

However, analysts at independent broker LPL Financial believe that after a five-month streak of wins, the S&P 500 is on track to mop up further profits this month. Further, the index has nearly always gained in the one-year period immediately following this winning streak. This makes it imperative to pick up S&P 500 stocks, which have mopped up strong gains during this period.

Third Strongest Bull Run for S&P 500

The S&P 500 gained 0.1% on Sep 13, ending at 2,498.37, only marginally short of the 2,500 mark. Since March 2009, the index has gained a stunning 269%, eclipsing the 266% increase recorded during the Bull Run extending from 1949 to 1956. This increase makes the current Bull Run the third strongest ever recorded. These insights were revealed by data from Bloomberg and the S&P 500 Dow Jones Indices.

Although the extent of these increases could raise selloff fears among investors, such alarm is unwarranted. But this is because this stretch of gains loses its luster when considering annualized returns. This measure comes in at only 17%, the fourth poorest when considering 13 such periods. The reason for such a dismal showing is not difficult to discover, of course. At eight and a half years, this is the second longest Bull Run of all time.

Five-Month Stretch of Gains to Power Future Increases

But for March, when it lost 0.04%, the S&P 500 has now gained for five straight months in a row. In fact, the index has now gained for nine months out of the last 10. Taking total returns into account, which includes the impact of dividends, the index has increased every single month since October 2016.

Even as a large swathe of investors worry about pricey valuations, this long streak of gains should serve to ease their fears. Analysts at LPL Financial have stated that such five month stretches of gains are usually followed by year over year increases nearly 96% of the time. The average increase recorded over this period stands at 13.2%. The S&P 500 had gained for five successive months during the period stretching from March to July last year. Between July 2016 and 2017, the index gained 13.7%.

Considering a shorter time frame, the S&P 500 also increases over the month following such a winning streak, opines LPL Financial. Per the company’s data such gains have occurred 20 out of 25 times in the past. During the month immediately after a five-month winning stretch, the index has increased by an average level of 1.3%. Incidentally, the S&P 500 has already gained 1.1% till now this month.     

Our Choices

With the S&P 500 lingering near the 2,500 mark, market naysayers are already raising the specter of a pullback. However, long term trends show that a five month winning streak is usually followed by strong year-over-year gains.

Further, such a stretch of increases usually leads to gains in the month immediately following such a period. Picking S&P 500 stocks which have notched up strong gains during this period makes for a profitable option. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score. 

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.

The Boeing Company (BA - Free Report) is a premier jet aircraft manufacturer and one of the largest defense contractors in the United States.

Boeing has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 29.2% for the current year. Its earnings estimate for the current year has improved by 0.7% over the last 30 days. The stock has gained 36.2% over the last 24 weeks.

Caterpillar Inc. (CAT - Free Report) is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines.

Caterpillar has a VGM Score of B. The company has expected earnings growth of 52.6% for the current year. Its earnings estimate for the current year has improved by 0.1% over the last 30 days. The stock has gained 28.8% over the last 24 weeks. The stock has a Zacks Rank #1 (Strong Buy). 

Estee Lauder Companies, Inc. (EL - Free Report) is one of the world's leading manufacturers and marketers of skin care, makeup, fragrance and hair care products.

Estee Lauder has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 14.1% for the current year. Its earnings estimate for the current year has improved by 4.7% over the last 30 days. The stock has gained 28.2% over the last 24 weeks.

Total System Services Inc. (TSS - Free Report) provides electronic payment processing, merchant services and related services to financial and non-financial institutions in the United States and internationally.

Total System Services has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 16.6% for the current year. Its earnings estimate for the current year has improved by 1.5% over the last 60 days. The stock has gained 27.4% over the last 24 weeks.

Thermo Fisher Scientific, Inc. (TMO - Free Report) is a scientific instrument maker and a world leader in serving science.

Thermo Fisher Scientific has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 12.8% for the current year. Its earnings estimate for the current year has improved by 1% over the last 30 days. The stock has gained 24.3% over the last 24 weeks.