A Shower of April Profits

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 April.

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?

At Motley Fool CAPS, more than 97,000 investors have weighed in on more than 5,500 stocks, awarding five-star ratings to the companies that command the most 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 April:

Sources: America Online, Motley Fool CAPS.

What has driven the stellar performance of aesthetic laser maker Palomar in April, even as much of the rest of its year tends to border on profitable? While it might be that vain consumers are thinking of the beach and want to rid themselves of unwanted hair, varicose veins, and tattoos before summer, Palomar's declining rival Candela, by contrast, seems to do best in November. That's why we don't recommend using this as a list of stocks to buy or sell -- just a platform for further research. Whatever the reason, Palomar's four-star CAPS rating suggests investors may be looking for the company to continue to outperform.

Except for a few days here and there, thanks to the Federal Reserve, the year has been ugly for many stocks. But if April really is their month to shine, let's see which of the companies above might live up to that promise.

Zapping the competition
Despite being locked in a pitched court battle with Candela, in which both sides have essentially said they will take no prisoners, Palomar has done quite well pursuing others who have infringed on its patents. Consumers may be curtailing their spending, but vanity does not seem to be going away, and investors like the potential for home-based laser systems through a licensing agreement with Procter & Gamble (NYSE: PG).

It's those kinds of factors that lead CAPS investor taniak87 to rate Palomar to outperform.

Palomar Medical Technologies is going to keep on selling, especially as the baby-boomer women get older and want to try to keep themselves looking younger. With all of the wrinkle reducers and laser treatments, this company will continue in great sales in the market. They also have great partnership with many other companies that are promoting the same things like [Johnson & Johnson] and Gillette.

Of course, others aren't so sure. Aside from the extended legal battle that has the potential to siphon cash from the balance sheet, CAPS player IBleedConcrete is concerned about Palomar's lack of growth in sales.

R&D costs are marching up quarter after quarter and sales are slipping. Where is the growth to justify this PE?

With competing infringement claims against each other, it seems that only one of the two laser makers can emerge victorious here. Yet Candela has been engaged in a race to the bottom in terms of valuation, and one wonders whether it can even survive a protracted court battle.

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. Because it's free to sign up and express your investing opinions, why not use this opportunity to take your star turn?