Quant Strategy Highlights WDC, BAC, LMT, and ICHR Amid September Seasonal Weakness

Author: Steven Cress, Quant Team

Compiled by Deep潮 TechFlow

DeepChao Summary: Steven Cress, Head of Quant Strategy at Seeking Alpha, believes September has historically been the weakest two-week period of the year, with midterm election year lows often occurring around September 30; however, since 1950, October and November have been the two best-performing months during midterm election years. He screened for Quant “strong buy” candidates that are trading at a discount to their 50-day moving average and have pulled back from their highs, identifying Western Digital (WDC), Bank of America (BAC), Lockheed Martin (LMT), and semiconductor equipment provider Ichor (ICHR)—with WDC and ICHR directly positioned within the AI storage and semiconductor materials equipment supply chains.

The seasonal weakness in September created a significant discount for a group of stocks with still-solid fundamentals.

In midterm election years, October and November have historically been the strongest months of the year; stocks that have maintained growth, profitability, and cash flow but were temporarily hit by seasonal factors are more likely to rebound.

This article highlights four stocks with a Quant rating of "Strong Buy" that have withstood recent pullbacks while showing improvements in fundamentals and valuation.

I am Steven Cress, Head of Quantitative Strategies at Seeking Alpha, responsible for quantitative ratings and factor scoring for stocks and ETFs on the platform, as well as managing the Quant Growth and Income portfolio.

The market is currently going through the two weeks that are typically the worst of the year. Looking back nearly a century, September has averaged a decline of over 1%, with more than half of the years ending lower, and an average drawdown of about 4.7%.

In midterm election years, this seasonality is often more pronounced, with the seasonal low frequently occurring on September 30. This year’s trajectory also initially followed historical patterns: as of September 16, the Dow Jones, Nasdaq, and S&P 500 were all in negative territory for the month.

A market rebound is ahead

However, over the past week, the Nasdaq and S&P 500 experienced a modest rebound, pushing monthly returns back into positive territory. The rebound came slightly earlier than historical patterns, but it is not unexpected—fourth quarters in midterm election years often see sharp market turnarounds.

Since 1950, in midterm election years, October and November have been the two best-performing months, with average gains of 3.0% and 2.7%, respectively. This suggests that, for investors right now, it may be a rare buying opportunity.

What you should really focus on are stocks that have experienced significant pullbacks due to seasonality rather than a deterioration in fundamentals—company fundamentals, combined with Seeking Alpha’s Quant factor score, are the key to the next step in evaluation.

The screening process is straightforward: use the Seeking Alpha stock screener to identify stocks with a Quant rating of "Strong Buy," a current price below the 50-day moving average, and a pullback from recent highs. The four stocks that meet these criteria are Western Digital (WDC), Bank of America (BAC), Lockheed Martin (LMT), and Ichor Holdings (ICHR).

1. Western Digital

Market cap: $162.36 billion

Quant Rating: Strong Buy

Sector: Information Technology

Industry: Technology Hardware, Storage, and Peripherals

The first is a tech stock tied to the broader AI value chain and is expected to recover in the coming months of the year. Western Digital develops and manufactures data storage devices and solutions, serving hyperscale cloud providers worldwide. The company holds a strong position among leading HDD suppliers, with long-term supply agreements secured through 2031, providing solid visibility into future demand.

In the latest quarter, Western Digital's revenue and profits both exceeded expectations; management has identified the ramp-up of 40TB ePMR capacity and the pursuit of 44TB HAMR shipments in the first half of 2027 as key catalysts. The guidance of $4.1 billion in revenue for the first quarter of fiscal year 2027 also indicates sustained momentum.

Western Digital's Quant "Strong Buy" rating is an impressive 4.95, with a record nearly flawless in every aspect. Its profitability (A+) and growth (A) stand out particularly, with expanding profit margins and ample cash flow tied directly to AI-driven demand for data center storage.

The company's revenue growth rate of 35.70% is nearly three times the sector median of 12.74%. Increased demand for cloud storage, combined with pricing power, has also driven higher profit growth.

A recent 11% drawdown over the past month raised the valuation score from F to B-, presenting investors with a potential entry point. The P/E ratio has realigned with the sector's relative level, and the forward PEG stands at just 0.32, representing a roughly 74% discount compared to peers.

For those looking to enter the AI value chain at a more reasonable valuation, Western Digital offers: solid cloud demand, strong cash flow, excellent fundamentals, and continued potential to benefit from future AI growth.

2. Bank of America

Market cap: $391.8 billion

Quant Rating: Strong Buy

Sector: Finance

Industry: Comprehensive Bank

Forward Dividend Yield: 2.28%

This underlying asset has retraced approximately 13% from its August historical high. As one of the largest financial institutions in the U.S., momentum softened significantly by the end of the third quarter, potentially creating room for investors. The second-quarter earnings report significantly exceeded expectations: revenue rose 15% year-over-year to $31.6 billion, net profit increased 27% year-over-year to $9.1 billion, and earnings per share jumped 34% to $1.21. Average loans grew 8% to $1.22 trillion, while average deposits rose 2% to $2.02 trillion, reflecting broad-based fundamentals. Net interest income benefited from loan and deposit expansion, increasing 9% in the second quarter to $16 billion. The FOMC recently raised rates by 25 basis points, initiating a new round of tightening; as assets begin repricing at higher rates, net interest margin still has further room for improvement.

Bank of America acquired Quant in a forced purchase and ranks second among its peers. Its profitability (A+) and growth (B+) are both outstanding. Growth across all business lines has pushed the net profit margin to 29.52%, approximately 16% above the sector median; efficiency improved to 59%, indicating better cost control relative to revenue.

All factors are solid, but what caught my attention most is the valuation score (C+). While it’s only slightly above average, the improvement over the past few quarters has been significant. The forward PEG is 0.78, representing a roughly 24% discount compared to the sector median.

The income side is also strong: a dividend safety rating of B, with 12 consecutive years of dividend increases; a forward yield of 2.28%, and $6 billion in share repurchases during the second quarter, with a payout ratio of approximately 25.69%.

Bank of America remains one of the strongest and most profitable banks in the U.S. Despite a favorable interest rate environment, its stock has experienced a double-digit pullback—making it a compelling option for investors seeking a "growth + dividend" combination in the financial sector.

3. Lockheed Martin

Market cap: $120.87 billion

Quant Rating: Strong Buy

Sector: Industrial

Industry: Aerospace and Defense

Forward dividend yield: 2.64%

The third, perhaps most "appealing": It has declined about 14% over the past six weeks, yet Quant still maintains a "Strong Buy" rating. Lockheed Martin is a defense giant with a deep global footprint in defense contracts. Amid accelerating demand, its backlog has reached a record $230 billion; recent wins include a $1.2 billion U.S. Army missile contract and a $24.3 billion F-35 order from Saudi Arabia.

The Russia-Ukraine conflict and diplomatic stalemates have pushed defense spending by European and NATO countries to record levels, extending the procurement cycle for weapon systems. In the Middle East, conflicts involving Iran have been ongoing for approximately six months, resulting in massive ammunition consumption by the United States. Domestic and international inventory replenishment has created a sustainable demand pipeline for Lockheed Martin spanning multiple years.

Quant's "strong buy" is primarily supported by two A+ factors: profitability and earnings revisions. The four core business segments continue to demonstrate strong ability to convert orders into stable profits; analysts are actively raising their estimates for demand expansion amid global conflicts and tailwinds from U.S. domestic budgets, driving powerful revision momentum.

The valuation rating (C+) is somewhat misleading—based on expected earnings and growth, the company is currently trading at a significant discount. Its forward PEG is nearly 40% below the sector average and approximately 71% below its five-year average.

For income-focused investors, the dividend profile is also strong: consistent dividend increases for over two decades and a forward yield of 2.64%. All dividend metrics are solid—this cash-rich defense company remains well-positioned to meet shareholder return expectations.

4. Ichor Holdings

Market cap: $2.12 billion

Quant Rating: Strong Buy

Sector: Information Technology

Industry: Semiconductor Materials and Equipment

Finally, a slight "bonus"—it hasn't been heavily hit by September seasonality yet, but the pullback from its July high is already significant. Ichor, a leader in semiconductor manufacturing components, is currently trading near half its 52-week high of $113.58, offering a compelling entry point to consider.

Quant's performance record is nearly flawless, with A+ ratings in both valuation and growth. In recent years, the company has strategically shifted toward content expansion, with quarterly revenue now capable of exceeding $500 million and a long-term goal of reaching $3 billion in annualized revenue.

CEO Philip Barros said on the Q2 earnings call: “We are more confident today than ever before in the magnitude and duration of this growth cycle.” The forward PEG ratio is only 0.51, nearly 60% lower than the sector median; the long-term forward EPS growth rate is 70%, 254% higher than the sector median and 24% above its own five-year average.

Revised expectation rating: A-. Over the past 90 days, analysts’ revisions to earnings and revenue were almost entirely upward. It’s important to be honest: Quant’s rating for profitability is low (D+), but margins and profitability trends continue to improve. With ample liquidity, an expanding order pipeline, and an attractive stock price, Ichor offers a differentiated bet on semiconductors heading into the final quarter.

The September seasonality has once again pushed a group of strong stocks into the "discount zone." These assets have repeatedly proven that, over the long term, solid fundamentals will ultimately outweigh short-term noise. Historically, market lows during midterm election years often occur around September 30; the opportunity lies in the fact that October and November are typically the two best-performing months within the same cycle. I still believe seasonal headwinds will give way to a strong year-end rally, led by stocks with the strongest fundamentals.