The September effect

First things first, let’s look at the cold, hard facts. According to the data, September does indeed have a rather poor track record. Over the past 20 years, September ranks as one of the worst-performing months. The FTSE 100 has typically fallen by over 1.1% for the month, and the S&P 500 shows September as the only consistently negative month. Even the tech-heavy NASDAQ 100 can’t escape September’s curse, with it being one of the worst months over the past two decades for that index.

Interestingly enough, only five S&P 500 companies posted an average gain in September in the last five years. These all sit within the financial sector, with the best performer, PNC Financial Services (NYSE:PNC), returning an average of 1.2% in the same time period. With its highly diversified operation, it’s no surprise to see the company perform well throughout the year, with a healthy 54% rise in the last year alone.

The firm pays a decent dividend of 3.54%, backed up by solid cash flows, and a payout ratio of 52%, suggesting this could rise further if profits allow. A discounted cash flow (DCF) calculation suggests it’s still about 37% below fair value too. Despite annual earnings of 12% forecast over the next five years, I wouldn’t call this a sure thing. There has been plenty of insider selling in the last three months. Although this can be unrelated to performance, it’s not exactly inspiring to see over $2.5m sold by senior management.

A silver lining

While the general data might seem gloomy at first glance, there’s a flip side that long-term investors should consider. If September tends to see market dips, isn’t this precisely the time when we should be looking for bargains? Warren Buffett famously said, “Be fearful when others are greedy and greedy when others are fearful”.

For those of us diligently investing each month, September offers a chance to buy more with the same amount of money. Remember, we’re investing for years, not months. A single poor month matters little in the grand scheme of a decades-long investing journey.

An autumnal opportunity

So, is September really the worst month in the stock market? Statistically speaking, it has indeed been a weak performer. But for investors with a long-term mindset, I’d say it presents an opportunity rather than a threat.

Instead of fleeing the market, consider these Foolish strategies: keep calm and carry on investing by sticking to a regular investment plan. Use any September weakness to snap up quality companies at a discount. Focus on fundamentals, as a company’s long-term prospects matter more than short-term market jitters. Embrace volatility and remember that market fluctuations are the price paid for superior long-term returns.

So while September might give us a bumpy ride, it’s just one month out of many. By keeping a cool head and focusing on the long game, investors can turn September’s reputation as the worst month into an opportunity for building lasting wealth.

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