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 March.

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 85,000 investors have weighed in on more than 5,400 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 each month. The following five companies seem to do best in March:

Stock

Market Cap

Avg. % Return, March

Avg. % Return, Rest of Year

CAPS Rating (out of 5)

1-Year Return

Dendreon (Nasdaq: DNDN)

$436 million

38.85%

(2.63%)

**

25.55%

Western Refining (NYSE: WNR)

$1.2 billion

34.97%

(4.97%)

****

(37.25%)

DXP Enterprises (Nasdaq: DXPE)

$232 million

30.79%

5.95%

****

18.84%

Jones Soda (Nasdaq: JSDA)

$135 million

31.03%

0.56%

**

(58.47%)

Rochester Medical (Nasdaq: ROCM)

$113 million

16.67%

1.19%

*****

(29.97%)

Sources: America Online, Motley Fool CAPS.

What drove the stellar March performance of beverage maker Jones Soda? The surge is most likely an anomaly, much like August's status as the worst month to own the stock; Jones Soda falls by an average of more than 12% during that month. On the other hand, May is the best-performing month for rival Hansen Natural (Nasdaq: HANS); it returns an average of about 35% in the month. That's why we don't recommend using this as a list of stocks to buy or sell (or advice on when to do it) -- just a platform for further research. Whatever the reason, Jones Soda's two-star rating suggests that CAPS investors perhaps don't believe it will outperform the market going forward.

The year's off to an ugly start for many stocks, but if March really is their month to shine, lets see which of the companies above might live up to that promise.

Biotech blues
The big winner for March is cancer therapy developer Dendreon, which got a big boost a year ago when an FDA panel found substantial evidence of efficacy and safety for its lead cancer drug Provenge. In fact, Dendreon's stock more than tripled in intraday trading the day after it announced the findings, and that move is, in fact, what accounts for the month being special for it.

Unfortunately, it was just two months later that Dendreon got an approvable letter from the FDA which demanded further proof of efficacy, and the stock promptly collapsed to pretty much where it was trading before the euphoria began. Since then, the company has been keeping the hope for Provenge alive by repackaging data that was generally already known, as well as beginning a new phase 3 trial. It's probably why CAPS investors have only bestowed twin stars on Dendreon's stock.

Still, CAPS All-Star madcowmonkey, who has a 97.70 player rating, saw late last month the potential of Dendreon ultimately coming down to whether it's able to prove itself to the FDA. If so, he's "all in":

[I]f the new drug passes it will send it up quickly. Just a little bit of good news sent the stock up a little. Bad news like law suits would kill the deal. If it does work and it fights cancer, then I am all in.

CAPS player tomk0508 agrees, and, in early February, saw the company's recent management moves as proving itself to be earnest about achieving success:

Fortunately, the drug is relatively harmless and very effective for cases that have been unresponsive to other treatments. The company's recent promotion of Froelich to Chief Medical Officer shows they are earnest about changing the relationship with the FDA. The near term may be ugly but by late 2008 the outperform rating will be clear to all.

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

Jones Soda is a recommendation of Motley Fool Rule Breakers. Thirty days of free stock picks is a great deal no matter what month it is. Take a risk-free trial subscription to any of The Motley Fool's investment services today.

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.