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 prices to jump.
But what about other months? Investing based solely on the calendar is certainly not a Foolish strategy, but wouldn't it be great to know ahead of time which stocks performed best at what times? We could use the results to find stocks that are perhaps worthy of further research.
On Motley Fool CAPS, more than 120,000 members have weighed in on some 5,400 stocks, awarding five-star ratings to the companies that best 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 seem to do best in December:
|
Stock
|
Market Cap
|
Avg. % Return-Dec.
|
Avg. % Return-Rest of Year
|
CAPS Rating (out of 5)
|
YTD Return
|
|
GMX Resources (Nasdaq: GMXR )
|
$449.4 million
|
30.37%
|
5.28%
|
***
|
(26.15%)
|
|
Orbital Sciences (NYSE: ORB )
|
$908.0 million
|
6.47%
|
1.03%
|
*****
|
(37.03%)
|
|
Hurco (Nasdaq: HURC )
|
$114.2 million
|
30.37%
|
2.91%
|
*****
|
(59.24%)
|
|
Rigel Pharmaceuticals (Nasdaq: RIGL )
|
$288.3 million
|
43.38%
|
(0.72%)
|
*
|
(68.96%)
|
|
Bare Escentuals (Nasdaq: BARE )
|
$409.1 million
|
9.58%
|
(6.59%)
|
****
|
(81.57%)
|
Sources: America Online, Motley Fool CAPS. YTD = year to date.
What's made GMX Resources a better performer in December compared to the rest of the year? Considering that rival Cabot Oil & Gas (NYSE: COG ) does better in June, the reason isn't obvious.
We'd need to look closer for the reasons giving any of the stocks in the chart above a December boost, but the three-, four-, and five-star CAPS ratings suggest that investors think there's something worth mining here. If December really is their gift of a month for investors, let's see which of the companies above might live up to that promise.
A Herculean task
As business begins retrenching in the face of the economic slowdown, companies like computer-controlled machine tool maker Hurco have found it difficult to grow profits. While the Motley Fool Hidden Gems recommendation remains perhaps one of the best such companies you've never heard of, it reported a 40% decline in net income this morning as global orders fell. That's not unexpected. Meanwhile, the company had already strengthened its balance sheet so that it ended the year with $33 million in cash and equivalents, and no debt.
While worldwide markets are slumping along with the U.S., CAPS member dudleydeg figures emerging economies like India and China will need Hurco's technology when they recover: "Beaten down now, but long term great potential. Great products and the future world leading countries China / India will need these products for their population job growth."
Swirl, tap, and buy?
In a market seemingly teeming with cosmetics companies, including well-known names like Estee Lauder (NYSE: EL ) and Elizabeth Arden, it seems counterintuitive that Bare Escentuals can make a significant case for growth. Yet analysts see cosmetics as one segment of the consumer products market that is holding up well in this recession, and the unconventional nature of its products sets Bare Escentuals apart. However, CAPS members like medusasbedhead remain unconvinced, and believe lower-cost rivals will win out:
Too many cheaper/better quality competitors out there; market is getting saturated w/mineral makeup. I suspect Bare Escentuals is going to have to either reformulate or lower prices to survive in its particular sector. Hell, even Maybelline has come out w/a new mineral makeup line. When you can buy these things for a fraction of what the name brand charges at your local CVS/Target, the middle class market is going to fall away from the pricier brands like BE.
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?
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