You've undoubtedly heard of the "January Effect," the phenomenon that seemingly causes stocks, particularly small caps, to surge in the month of January. The theory is that investors and institutions sell in December for tax reasons, and buy stocks back the following month, causing them to jump in price.
Whatever the reason, banking on it is certainly not a Foolish way to invest. If we sift through enough data and calculate the numbers in just the right way, we can uncover just about any causal relationship we want. I mean, as Foolish colleague Selena Maranjian once noted, you can accurately predict how the market will react by following butter production in Bangladesh.
A season for everything
But information is information and sometimes stocks do perform better at certain times. Retailers, for example, have seasons that are better-performing than others simply because of the nature of their business. So, wouldn't it be great to know ahead of time which stocks performed best when?
On Motley Fool CAPS, more than 79,000 investors have sized up the potential of more than 5,300 companies. Those they think have the best potential for beating the market are assigned a five-star rating. We'll take some of those highly rated companies and pair them with data going as far back as five years to check out in which month they perform best. Below are five companies that do best in January.
|
Stock |
Market Cap |
Avg. % Return-January |
Avg. % Return-Rest of Year |
CAPS Rating |
1-Year Return |
|---|---|---|---|---|---|
|
Atheros Communications |
$1.5 billion |
31.43% |
3.53% |
***** |
45.06% |
|
ICO |
$332 million |
15.10% |
3.72% |
***** |
138.90% |
|
Biomarin Pharmaceutical |
$2.6 billion |
14.75% |
1.64% |
***** |
114.98% |
|
Jacobs Engineering |
$5.6 billion |
7.64% |
1.43% |
***** |
138.64% |
|
Atwood Oceanics |
$3.2 billion |
7.15% |
3.00% |
***** |
104.73% |
To what can we attribute the stellar January performance of integrated WLAN circuit maker, Atheros Communications? It's not an industry-wide phenomenon because most of its competitors, like STMicroelectronics
More than likely it's an anomaly, much as July happens to be the worst month to hold Atheros stock, when, on average, it has fallen more than 11%. That's why we don't recommend using this as a list of stocks to buy or sell, but as a platform for further research.
Yet whatever the reason, the CAPS community believes the potential is significant for it to continue outperforming the market.
CAPS special effects
More than 1,100 investors have rated Motley Fool Hidden Gems recommendation Atheros, and 99% rate it an outperform. And it's nearly unanimous among CAPS All-Stars, those investors who consistently perform better than their peers over time.
When top-rated All-Star KempInTheWoods gave Atheros the thumbs-up last year, he liked not only the business prospects, but the company's fundamentals as well. Many of the cited reasons remain intact today:
Everything-on-one-chip radios for cell phones, wi-fi networking, etc.-should be a continuing growth market *especially* in developing nations. P/E is a little high, but 68% yoy growth, zero debt, and 20% insider ownership is soothing to the soul.
Of course, not everyone thinks Atheros can make the connection. Industry analysts at NetScribe thinks it's too small of a fish in a big and growing pond. Netscribe sees it rather as a takeover candidate in an industry undergoing consolidation:
Already the industry is in big league and touching $4 billion means further consolidation which is the hallmark of any sector which is in the growing stage. Atheros communication is not a big player and cannot get into acquisition mode if consolidation spree begins, but the company with 98% of revenues coming from Asia, presents itself as a good target for the big five players. Since most of the growth in the future will be coming from Asia the company's revenue stream looks secured. Thus the chances of it getting acquired will influence its share price positively.
We might wonder, though, what Netscribe would think of Atheros' announced acquisition of u-Nav just two weeks ago. If GPS capabilities will make the difference between some of these companies surviving or failing, Atheros might be one of those coming out on top.
A calming effect
But we haven't yet heard from you, and at Motley Fool CAPS, every investor's opinion counts. Since it's free to sign up and post your thoughts, why not use this opportunity to take your star turn?
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