The stock market has entered October after two very difficult months, particularly for the technology sector. August and September delivered a combined 7.4% loss for the technology-laden Nasdaq Composite.
But those months tend to be weak each year due to seasonal factors. Many Wall Street bankers and fund managers are away on vacation, leaving fewer buyers to step in and support dips in the market. Investors are also navigating a surge in interest rates, especially in government bonds, which could trigger weakness in the broader economy.
But in an interview with CNBC earlier this week, Wall Street veteran Art Cashin described October as "the month of bottoms." He would know! He's the Director of Floor Operations at the New York Stock Exchange for UBS, and he has worked on the Street since 1959.
Interestingly, October also marked the end of a major decline in stocks in 2022. And research by analyst Eric Krull suggests October has the best track record for forming new bullish trends. If Cashin -- and history -- are correct, here are two stocks investors will want in their portfolios.
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1. Apple: Keep it simple!
There's no need to get adventurous during such a turbulent period in the stock market. Owning a stake in the world's largest company, Apple (AAPL 1.44%), not only presents a growth opportunity but also protects against downside risks because the organization is in such a strong financial position. Plus, Apple just released a slate of hot new products that could drive growth into the new year.
Its flagship iPhone 15 smartphone, which was unveiled on Sept. 12, appears to be in high demand. Early projections suggest initial sales could top 80 million units, and that would be a 6% improvement over the launch of the iPhone 14 last year. The iPhone 15 comes with the new A17 chip, which is Apple's most powerful ever, and it could even be the most powerful in the entire smartphone market right now.
The A17 is capable of rapidly handling predictive processes when using the keyboard, the camera, and Siri, for example, which are features underpinned by artificial intelligence (AI). Similarly, Apple's latest S9 chip allows its smartwatches to recognize finger gestures which introduces a whole new dynamic to the platform. Both chips process AI on-device rather than in the cloud, which leads to more responsive results.
Apple is coming off three consecutive quarters of declining revenue which, combined with the recent market sell-off, is the reason its stock is down 12% from its all-time high. But Wall Street is forecasting a return to growth on an annual basis in fiscal 2024 (which just began in October). Apple could generate $403 billion for the year, which would be a 6% increase from the $383 billion in fiscal 2023 revenue that analysts expect to see when the company reports its final results later this month.
But one of the best reasons to own Apple stock is because it returns truckloads of money to shareholders -- it's one of Warren Buffett's favorite things about the company, in fact. Through the first nine months of fiscal 2023 (ended July 1), Apple has paid $11.2 billion in dividends to its investors, and it has spent a whopping $56.5 billion on share buybacks.
The latter is key because share buybacks can serve as a support mechanism for Apple's stock price. The company is consistently purchasing billions of dollars' worth of its own shares to shrink the float and, theoretically, increase the price per share.
Apple's fundamentals look solid going into the new year on the back of its recent product releases, but the company's focus on shareholders is a great feature to have in an investment during an uncertain time in the market.
2. Oracle: A great investment in the future of technology
With technology stocks suffering broad declines, this might also be a great time for investors to set their portfolios up for the future. Oracle (ORCL 0.86%) offers a great opportunity to do just that, and it's anchored by a track record spanning almost five decades because the company has been at the forefront of the tech sector since it was founded in 1977.
Oracle has come a long way since its origins in developing database management software because today, it's a leading provider of cloud computing infrastructure and technology. It offers an entire portfolio of cloud-based software applications for businesses in just about every industry, from healthcare to retail to financial services. However, the company has also invested heavily in best-in-class data center infrastructure, which is serving as a foundation for its entry into the emerging artificial intelligence industry.
AI has been a focus for Oracle this year as it races to compete with other tech giants jostling for leadership positions in the space. AI applications are developed, trained, and deployed in the cloud, so Oracle has partnered with leading semiconductor giant Nvidia to build advanced data center hardware specifically for those activities.
Oracle's co-founder and chairman, Larry Ellison, says the company's interconnected Nvidia superclusters can train AI models at twice the speed and half the cost of other cloud providers. Its investments in this area are already paying off because, in the recent second quarter of 2023 (ended June 30), Oracle said it had secured $4 billion in commitments from generative AI developers for its new Gen2 Cloud infrastructure -- that number doubled from $2 billion in just three months.
But demand from developers might still be in the early stages because, according to Cathie Wood's Ark Investment Management, AI software companies will be fighting over a revenue pie worth $14 trillion by 2030, so they'll need all the computing power they can get.
In Q2, Oracle said it had $65 billion worth of remaining performance obligations across its business, but demand is far outpacing supply, so it's racing to build more data centers, which it says should lead to an acceleration in its revenue growth toward the end of 2023.
Oracle stock hit an all-time high this year, but it's trading 18% below that level amid the broader tech sell-off. That's a great opportunity for investors to take a long-term position.
