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.
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 100,000 investors have weighed in on more than 5,600 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 seem to do best in May:
|
Stock |
Market Cap |
Avg. % Return-May |
Avg. % Return-Rest of Year |
Return (YTD) |
|
|---|---|---|---|---|---|
|
Research In Motion |
$77.4 billion |
19.80% |
6.57% |
*** |
22.19% |
|
Corning |
$41.6 billion |
10.88% |
2.53% |
***** |
8.23% |
|
Cisco |
$155.7 billion |
4.66% |
0.83% |
***** |
(4.88%) |
|
eBay |
$40.9 billion |
6.30% |
0.56% |
*** |
(5.94%) |
|
Dell |
$41.0 billion |
5.56% |
(1.05%) |
** |
(18.16%) |
What's driven the relatively better May performance of online auctioneer eBay, even as much of the rest of its year tends to be a bit moribund? Is it that more people are increasing the number of auctions they post, or is it an anomaly? That's why we don't recommend using this as simply a list of stocks to buy or sell -- just a platform for further research. Whatever the reason, eBay's three-star CAPS rating suggests investors haven't put the stock up for sale just yet.
Dialing up growth
With management increasing expectations of subscriber growth by 15% to 20%, analysts are suggesting that Research In Motion may hit the higher end of forecasts. It's quite a different scenario than that of Apple's
Investors need to watch how the doom-and-gloom of the capital markets and the economy plays out. With nearly two-thirds of RIM's customers being corporate and government accounts, large numbers of layoffs on Wall Street could temporarily curtail the company's growth trajectory. Yet the new 3G phones are set to roll out this summer, allowing it to capitalize on the moribund state of rival Motorola
Top-rated CAPS All-Star tim2pac, who ranks higher than more than 99% of all CAPS players, likes the fact that RIM has never stopped innovating with its BlackBerry:
The wireless handset market is an ever changing marketplace.
Just ask Motorola ... or Nokia. 5 years ago they were the entrenched giants and it looked like no one could unseat them. They became complacent (although worldwide Nokia is doing just fine), and rested on their laurels. Motorola handsets are a joke now.
So what I like about RIMM, is that when it comes to their Blackberry devices they've never stopped innovating and they've never been satisfied with their market share. Their newest handset, the Bold, shows that, as [do] the rumored handsets said to be in development.
A calming effect
But 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 totally free to express your investing opinions, why not use this opportunity to take your star turn?
