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.

Whatever the reason, investing based solely on the calendar is certainly not a Foolish strategy. Backtesting and data-mining can turn up nearly any 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. July Return

Avg. Return Rest of Year

CAPS Rating

YTD Return

Crosstex Energy (NASDAQ:XTEX)

$1.2 billion

8.28%

(0.53%)

****

(11.49%)

Ambassadors Group (NASDAQ:EPAX)

$294 million

13.37%

0.98%

*****

(14.98%)

Smith Micro Software (NASDAQ:SMSI)

$221 million

21.45%

2.34%

****

(16.65%)

Park-Ohio Holdings (NASDAQ:PKOH)

$195 million

12.70%

1.81%

*****

(31.59%)

Carpenter Technology (NYSE:CRS)

$1.8 billion

8.20%

3.08%

****

(49.86%)

Sources: America Online, Motley Fool CAPS. YTD = year to date.

Why is July a better month for supply chain logistics and parts supplier Park-Ohio, while the rest of its year tends to be a bit flat? We're not sure. That's one reason why we don't recommend using this as simply a list of stocks to buy or sell -- just a platform for further research.

If July really is their month to shine, let's see which of the companies above might live up to that promise.

Wired for growth
While wireless application software developer Smith Micro reported that its merger with PCTEL's (NASDAQ:PCTI) MSG software group last December pinched earnings in the first quarter, gross margins remain decidedly plump at 76.6% for the quarter. And with the growth in its other segments -- connectivity and security grew 80% year over year -- Smith Micro might finally be able to return to its highflier days.

Top-rated All-Star CAPS member tenmiles argued three months ago that the collapse in shares was excessive, and that the financial situation remains secure:

Time to buy today's small cap tech collapse de jour, Smith Micro Software... Strong value metrics here for this company: net cash at 22% of current market cap; attractive ROE/pe metric; enterprise value/sales-appears to be another short term overreaction.

Steely resolve
Specialty steel and metals maker Carpenter Technology has suffered like other steelmakers, such as AK Steel (NYSE:AKS); both are down 25% to 30% over the past three months. But at least one analyst figures that steel prices have not yet hit their peak, as demand from China and India continues.

Carpenter's fall from its highs has CAPS member totto777 calling for an eventual reversal. While the specialty steelmaker has passed through totto777's price of $40 a share, weakness in a tight commodities market could still spell opportunity:

If it continues down to $40 would make CRS very attractive for a take over. Everyone likes a half off sale. Other than someone down-grading on recent weakness in the stock as it approaches it's 3-year moving average I see no valid catalyst; That's why I see this thing making a correction to the upside, after the Lemming mutual fund managers stop selling.

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

Ambassadors Group is a Motley Fool Hidden Gems Pay Dirt recommendation. Try any of our Foolish newsletters today, free for 30 days. You'll get recommendations on which stocks to buy and sell as well as a front seat for a trip inside the market analysts' minds.

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.