You've probably heard of the "January Effect," the phenomenon that seemingly causes stocks, particularly small caps, to surge in the first month of the year. In theory, investors and institutions sell securities in December for tax-harvesting reasons, then buy them back the following month, causing them to jump in price.
Yet what about other months? Retailers, for example, have some seasons that perform better than others, simply because of the nature of the business. Some stocks even do better in July.
Whatever the reason, investing based solely on the calendar is certainly not a Foolish strategy. Backtesting and data-mining can turn up nearly any causal relationship we want, if we search hard enough. Still, wouldn't it be great to know ahead of time which stocks performed best at what times?
On Motley Fool CAPS, more than 110,000 investors have weighed in on more than 5,500 stocks, awarding five-star ratings to the companies that most command their confidence. We've paired their opinions with data going as far back as five years to see which stocks perform best in each month. The following five companies have done best in July:
|
Stock
|
Market Cap
|
Avg. % Return-July
|
Avg. % Return-Rest of Year
|
CAPS Rating
|
Return (YTD)
|
|
Under Armour (NYSE: UA )
|
$1.3 billion
|
34.5%
|
(7%)
|
***
|
(40.9%)
|
|
Dynacq Healthcare (Nasdaq: DYII )
|
$100 million
|
47.6%
|
(1.2%)
|
**
|
68.9%
|
|
Genco Shipping (NYSE: GNK )
|
$1.7 billion
|
36.5%
|
2%
|
****
|
11.2%
|
|
LKQ (Nasdaq: LKQX )
|
$2.5 billion
|
10.5%
|
2.7%
|
*****
|
(13.3%)
|
|
NightHawk Radiology (Nasdaq: NHWK )
|
$220 million
|
14.3%
|
(8.4%)
|
****
|
(66.6%)
|
Sources: America Online, Motley Fool CAPS. YTD = year to date.
What has driven the better July performance of acute-care hospital operator Dynacq Healthcare, even as much of the rest of its year tends to be a loss? Are bariatric surgeries at a high as people try to get in shape for summer? We don't recommend using this as simply a list of stocks to buy or sell -- just a platform for further research. We need to look closer for the reason, but Dynacq's two-star CAPS rating suggests that investors are on a hunger strike over its prospects.
Except for a few days here and there, it's been a downer of a year, but if July really is their month to shine, let's see which of the companies above might live up to that promise.
No sweat
Even though its stock is down nearly 41% year to date, you won't find management of Under Armour sweating, at least not if they're wearing their signature moisture-wicking undergarments. It's been a powerfully popular addition to the gear that professional athletes bring to their game, such that industry leaders have taken notice. Nike (NYSE: NKE ) has launched an assault on Under Armour's eye-popping 79% market share with its own competing version.
So far, though, investors aren't breaking a sweat about the prospect of competition, as more than 90% of all CAPS players who rated the company still expect Under Armour to beat the market. Investors like JMB21 find the sportswear company's consistent performance is likely to hold up in the future, even if there are constraints imposed by a lackluster economy:
UA has strong fundamentals. ... Sales and earnings growth has been remarkable, as has growth in shareholder equity, one of my favorite marks of an outstanding company.
If UA can grow earnings in line with analysts' [expectations] (25%), its p/e can come down to a very reasonable 21, and the stock would still be trading at nearly a 50% margin of safety, given a 15% discount rate. In other words, at a 15% discount rate, UA's current share price bakes in an earnings growth rate of 15%.
A calming effect
Still, we haven't yet heard from you, and at Motley Fool CAPS, every investor's opinion counts. Your voice affects these stocks, whatever month the calendar may display. Since it's free to sign up and express your investing opinions, why not use this opportunity to take your star turn?
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