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.
But 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 105,000 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 |
CAPS Rating (out of 5) |
YTD Return |
|---|---|---|---|---|---|
|
MasterCard |
$36.2 billion |
33.91% |
6.60% |
*** |
29.67% |
|
Almost Family |
$131.2 million |
16.60% |
3.50% |
**** |
26.92% |
|
Columbia Sportswear |
$1.5 billion |
2.98% |
(0.21%) |
**** |
(2.77%) |
|
Amazon.com |
$33.7 billion |
11.42% |
1.84% |
** |
(15.48%) |
|
Western Refining |
$647.5 million |
24.05% |
(12.57%) |
**** |
(62.93%) |
Sources: America Online, Motley Fool CAPS.
What's driven the performance of outdoor-clothing company Columbia Sportswear, which tends to see strong returns in May even as much of the rest of its year is a bit flat? Is it that more people are getting ready for the great outdoors as the weather warms up, or is it just an anomaly? It’s impossible to say for sure, and 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, the Motley Fool Hidden Gems recommendation's four-star CAPS rating suggests investors aren't expecting it to fall off a cliff.
Except for a few days here and there (thanks to the Fed), the year has been off to an ugly start for many stocks. Let’s see which of the companies above might live up to their May promise.
Dialing up growth
There is perhaps no greater statement about Amazon.com’s impact on the book-buying public than the speculation that Barnes & Noble
At the same time, Amazon has apparently unveiled its e-book reader Kindle to much greater demand than anticipated -- so much so that a Citigroup analyst has come out with a Henry Blodgett-like prediction that sales for the device will reach as much as three-quarters of a billion dollars in two years. While some mental gymnastics are needed to reach such a conclusion, the fact remains that when it comes to book-selling, Amazon isn't running for the borders.
The simplicity of what Amazon does is perhaps best summed up by CAPS investor EviLucius, who likes the ease of use, pricing, and security of the transactions:
I love amazon. Since I spend lots of time on amazon and make lots of purchases on there with confidence that I'm getting a great deal including good service and a secure transaction, I assume that millons of consumers who use amazon also feel the same way. My vote is up and up for amazon!
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?
