You've heard of the "January Effect," where investors sell stocks in December for tax reasons, only to buy them back in January, causing their price to jump.
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 actually do best in December, despite the window dressing going on. Whatever the reason, investing based solely on the calendar is certainly not a Foolish strategy.
Still, wouldn't it be great to know ahead of time which stocks performed best at what times?
On Motley Fool CAPS, more than 120,000 members have weighed in on nearly 5,400 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. These five companies seem to do best in December:
|
Stock
|
Market Cap
|
Avg. % Return-December
|
Avg. % Return-Rest of Year
|
CAPS Rating (out of 5 max)
|
YTD Return
|
|
American International Group (NYSE: AIG )
|
$4.76 billion
|
4.32%
|
(4.26%)
|
***
|
(96.90%)
|
|
AK Steel (NYSE: AKS )
|
$770 million
|
16.78%
|
4.23%
|
***
|
(85.05%)
|
|
Goodyear (NYSE: GT )
|
$1.4 billion
|
11.33%
|
0.42%
|
**
|
(79.66%)
|
|
Petrobras (NYSE: PBR )
|
$85.5 billion
|
12.03%
|
2.55%
|
*****
|
(66.09%)
|
|
PotashCorp (NYSE: POT )
|
$17.8 billion
|
9.34%
|
3.31%
|
****
|
(58.74%)
|
Sources: America Online, Motley Fool CAPS, Yahoo! Finance.
What's made American International Group a better performer in December compared with the rest of the year? Considering that another insurer, Berkshire Hathaway (NYSE: BRK-A ) , does best in November, it's one reason why we don't recommend simply using this as a list of stocks to buy or sell -- just a platform for further research. We need to look closer for any reason, but their (mostly) high CAPS ratings suggest that investors think there's something worth mining here. If December really is their gift to investors, let's see which of the companies above might live up to that promise.
Drowning in oil
Maybe we should start to think of Brazil as the Saudi Arabia of the Western hemisphere, at least as far as oil goes. Following the major finds in the Tupi and Iara oil fields, which alone almost doubled the reserves of the country, Petrobras reported that it found yet another potentially rich vein of oil in the Jequitinhonha Basin. This one is partly owned by Norway's StatoilHydro (NYSE: STO ) . The Brazilian oil producer has said it will exploit at least the Tupi and the Iara fields, regardless of the credit crunch.
CAPS member Sergi0 acknowledges Petrobras is not the best dividend payer of the bunch, but writes that with its massive reserves, it will excel when oil prices begin to climb again:
"Largest [company] of Brazil. Recently discovered very large fields of oil, but they will need to spend a lot of time and money in research how to extract oil from very high depths under a salt layer. There are several Brazilian companies that are better dividend payers, but when oil prices [rise] again this stock will take off."
Running on empty
Considering the woes of the automotive industry, there's little wonder that Goodyear is trading near all-time lows. Yet while car companies are an integral part of the tire maker's business, they represent far less than what you might suppose. In Goodyear's important North American market, replacement tires comprise more than two-thirds of the units sold. For that reason, CAPS member ValueMrk figures Goodyear's upside potential to be quite large:
"All things related to automobiles [have] become cyclical. This fear should be used to the value investors advantage. First of all [Goodyear] sells replacement and OEM tires for all size vehicles (small, mid, large, over-size, heavy etc...) Goodyear is not only tied to OEM [market]! People will drive and tires need to be replaced. ... Although they have been hampered with long-term debt to cost/work agreements they have done an excellent job reducing debt. Q2 of '08 was a record [quarter]!"
A calming effect
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. 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?
RSS Headlines
Fool UK