Will These Stocks Win From the January Effect?http://www.fool.com/investing/small-cap/2011/01/10/will-these-stocks-win-from-the-january-effect.aspx Brian Stoffel
January 10, 2011
What does Conan O'Brien have in common with small-cap stocks during December? Both were punished unfairly. O'Brien, with his awesome red pompadour, worked the late-night circuit for 16 years to get a shot at the big time. In the end, his Tonight Show stint lasted a paltry seven months, as he refused to let execs move his time slot past midnight to make room for Jay Leno.
In the world of investing, the same thing occasionally happens to small-cap stocks around the end of the tax year. In investing guru Peter Lynch's Beating the Street, he described a phenomenon he termed the January Effect. "You could make a nice living buying stocks from the low list in November and December during the tax-selling period, and then holding them through January, when prices always seem to rebound. This January effect ... is especially powerful with smaller companies," Lynch said.
Source: Capital IQ, a division of Standard and Poor's.
Let's dig further to see if these stocks dropped for a good reason, or if they might stand to benefit from the January Effect.
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