The March Mayhem Effect

You've heard of the "January Effect," in which investors sell stocks in December for tax reasons, only to buy them back in January, causing their price to jump.

All year long, we look at stocks that also do better in other months. Retailers, for example, have some seasons that perform better than others, simply because of the nature of the business. And some stocks actually do best in March. 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 130,000 members have weighed in on some 5,300 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 March:

Stock

Market Cap

Avg. % Return, March

Avg. % Return, Rest of Year

CAPS Rating (5 max)

LTM Return

Genentech (NYSE: DNA  )

$97.6 billion

4.22%

0.85%

****

15.41%

Celgene (Nasdaq: CELG  )

$19.4 billion

12.84%

1.16%

****

(25.95%)

GameStop (NYSE: GME  )

$4.1 billion

15.43%

1.25%

****

(46.21%)

Take-Two Interactive (Nasdaq: TTWO  )

$532.1 million

10.89%

(1.94%)

****

(72.21%)

Boyd Gaming

$312.6 million

5.88%

(2.50%)

**

(81.28%)

Sources: America Online, Motley Fool CAPS. 

What has made video game retailer GameStop a top resale value in March? When you consider that Amazon.com (Nasdaq: AMZN  ) is trying to push into the game resale market yet performs better in April, that's a good reason why we don't recommend simply using this as a list of stocks to buy or sell. Consider it just a platform for further research. We may need to look closer for a reason, but GameStop's four-star CAPS ratings suggests that investors think the future will head upward for the retailer. Let's look more closely at some of the other names on our list.

Absorbing like a sponge
There's nothing like a takeover agreement to help you boost your March profile, or so Genentech is proving with the $95-per-share bid it agreed to from Swiss pharmaceutical giant Roche. The two have come to terms at last over Roche's pursuit of the 44% of the biotech it doesn't already own, and the $46.8 billion deal will surpass the just-announced $41 billion merger between Merck and Schering-Plough (NYSE: SGP  ) -- which in turn trumped the $33 billion marriage between Pfizer (NYSE: PFE  ) and Wyeth.

A dearth of products in the pipeline means this wave of consolidation in the pharmaceutical industry should have been expected. Sure enough, this deal was no surprise, as Roche has been in pursuit of Genentech for months. But if the increasing number of deals continues to rise, that might start pushing up valuations even more. The Pfizer deal implied that Wyeth was worth eight times EBITDA, while Merck's bid valued Schering-Plough at 9.9 times EBITDA. Roche, on the other hand, is paying a princely sum of 17 times Genentech's EBITDA.

It was the potential for this deal's consummation that had investors such as CAPS All-Star member quinpeung arguing that Genentech's depressed shares were undervalued: "Roche wants the shares of [Genentech] that they don't already own, but the board of [Genentech] does not like the offer. Stock will hold steady or even rise slightly until this issue is resolved."

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?

Pfizer is a Motley Fool Inside Value recommendation. Take-Two Interactive Software is a Motley Fool Rule Breakers selection. GameStop is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Pfizer. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey owns shares of GameStop and Merck but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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