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 on 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

STEC (Nasdaq: STEC  )

$550.4 million

18.92%

2.41%

**

27.80%

Strayer Education (Nasdaq: STRA  )

$3.1 billion

6.94%

1.73%

***

26.82%

Merit Medical Systems (Nasdaq: MMSI  )

$434.7 million

10.80%

0.68%

****

13.31%

Seabridge Gold (NYSE: SA  )

$791.1 million

30.73%

6.60%

**

(27.96%)

Crocs (Nasdaq: CROX  )

$703.2 million

37.95%

(12.83%)

**

(77.04%)

Sources: America Online, Motley Fool CAPS.

What's driven the better July performance of medical device maker Merit Medical Systems, even as much of the rest of its year tends to be a bit flat? Do radiologists and cardiologists need more disposable devices to assist in diagnoses in that month? Such conundrums are one reason why we don't recommend using this as a list of stocks to buy or sell -- just a platform for further research. We need to look closer to avoid jumping to conclusions, but Merit's four-star CAPS rating suggests that its investors have used their X-ray goggles to peer deeper into this growing company.

Except for a few days here and there, it's been a lackluster year. But if July really is these companies' month to shine, let's see which of them might live up to that promise.

An Ugg-ly comeback?
Comparisons seem inevitable between Crocs shoes and the curiously ever-popular Uggs boots by Deckers Outdoor (Nasdaq: DECK  ) . Since both are footwear, and both have been accused of faddish fanaticism by their detractors, the effervescent Ugg allows hope to spring eternal among beaten-down Crocs shareholders. As CAPS investor scentedflame says, Crocs shoes remain fairly popular because of the comfort they provide, even if the stock doesn't do likewise:

Crocs are only somewhat of a fad. They still have value as footwear due to the comfort and are also used by nurses. They were grossly overvalued not too long ago. Now it looks like they are grossly undervalued. Seriously, isn't their name brand alone worth the 700 million market cap they're fetching? PE ratio of 5? All of this because growth has slowed down and inventory levels are up. So what? They misjudged the growth of their product.

A new spin on memory
SSDs are "solid state drives" -- hard drives for your computer built entirely out of semiconductors, instead of magnetic media. STEC is a flash memory maker building internal SSDs for your computer, as opposed to the plug-in flash drives most people now know. Since these drives have no moving parts, SSDs offer faster data access, greater reliability, and lower power consumption. Their one drawback has been cost, though that is declining rapidly as well. Still, concern over consumer spending has held back STEC, says CAPS analyst mattro88:

Solid state disks are the way of the future - they are faster, smaller, and more reliable than spinning disks. Right now investors are concerned about weakness in consumer electronics sales, which has hurt both STEC and SanDisk (Nasdaq: SNDK  ) . What these shorts fail to recognize is that SSDs are beginning to take share from spinning disks in larger applications, from laptop computers to enterprise storage. STEC's SSD technology is cutting edge, and their revenue is growing.... Competition from Samsung is a bigger concern, but I'm betting there will be room in this market for competition, and that on STEC's superior technology will carry them.

A calming effect
Still, we haven't 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?

Crocs is a Motley Fool Hidden Gems Pay Dirt recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey sold his Deckers shares long ago, leaving lots of money on the table. He does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 26, 2008, at 6:27 PM, unnarsson wrote:

    Crocs - comfort - nurses

    This is big opportunity for the company. Working shoes for everybody working on foot. Nurses, doctors, waitresses etc. New line coming this fall.

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