5 Stocks Basking in the Summer Sun

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 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 seem to do best in July:

Stock

Market Cap

Avg. % Return, July

Avg. % Return, Rest of Year

CAPS Rating (out of 5)

YTD Return

Genzyme (Nasdaq: GENZ  )

$21.1 billion

12.58%

0.09%

*****

6.09%

Teledyne Technologies (NYSE: TDY  )

$1.9 billion

10.72%

1.77%

*****

(0.24%)

DXP Enterprises (Nasdaq: DXPE  )

$266.2 million

30.99%

6.48%

****

(10.24%)

Intuitive Surgical (Nasdaq: ISRG  )

$10.8 billion

20.81%

4.59%

****

(13.07%)

SanDisk (Nasdaq: SNDK  )

$3.9 billion

19.07%

(0.54%)

****

(47.66%)

Sources: America Online, Motley Fool CAPS.

What's driven the better July performance of domestic industrial products distributor DXP Enterprises? Much of the rest of its year tends to be a big loss, and much larger rival MSC Industrial Direct (NYSE: MSM  ) does better in May. Well, this is an example of why 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, since the company's four-star CAPS rating suggests that investors think it will be able to deliver.

While oil's decline in recent days has resulted in a bit of a market surge, it's otherwise 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.

Taking it to heart
Global biotech giant Genzyme derives half of its revenue from its therapeutics segment, which manufactures products to treat genetic and other debilitating disorders. Lately, it's been taking on Biogen Idec (Nasdaq: BIIB  ) in the area of multiple sclerosis; Genzyme's rival is the world leader in offering therapies for the disease. Biogen's Avonex is currently the market leader, while Tysabri is viewed as the newer, more effective treatment. Genzyme wants in on the $9 billion market, and it is moving its leukemia drug, Campath, to final clinical tests for patients with MS.

Investors like CAPS member Budsworth found back in April that the breadth of treatments Genzyme offers are a welcome plus at the well-managed biotech firm:

With the most recent resolution over manufacturing issues of MYOZYME enzyme replacement therapy for Pomp disease: should help gain favor with the FDA. They will be announcing mid stage data for the drug CLOLAR at the American Society for Clinical Oncology Conference. It is a treatment for childhood leukemia. They feel they have some very positive news to reveal. Also they will be announcing data for a treatment for oral Gaucher disease to be released in mid 2008. They are very excited about this most recent positive news. A well managed Bio-company with some real positive news. I'll go with them on this!

Robots on the Silk Road
Although it holds a near-monopoly on robotic surgical devices with its da Vinci system, Intuitive Surgical is not letting that get in the way of world domination. International sales already account for almost a quarter of its revenue, and it recently announced that it would take the Silk Road to China to advance sales there. While its Chinese efforts won't be an immediate moneymaker, the Motley Fool Rule Breakers recommendation expects that price cuts in the company’s robots in China will be offset by lower overhead.

The lack of meaningful competition has investors like CAPS member SwingLong betting that the price will continue to rise, even though it looks expensive by any number of valuation metrics:

Until I see strong competitors, this stock is going up. Younger MDs are better able to operate the Da Vincis, so as more of them come out of med school, demand will keep growing. International sales will also keep growing. In mid-200s, I think the stock is on discount.

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?

Intuitive Surgical is a Motley Fool Rule Breakers selection. MSC Industrial Direct and Biogen Idec are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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