You've probably heard of the "January Effect," the phenomenon that seems to cause stocks, particularly small caps, to surge in the first month of the year. In theory, it's because investors and institutions sell securities in December for tax-harvesting reasons, buy them back the following month, and subsequently cause them to jump in price.

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 May.

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 when?

On Motley Fool CAPS, more than 100,000 investors have weighed in on more than 5,600 stocks and awarded five-star ratings to the companies that most command their confidence. We've paired their opinions with data going back five years to see which stocks perform best in each month.

Here's a list of five companies that seem to do best in May:


Market Cap

Avg. % Return: May

Avg. % Return:
Rest of Year

CAPS Rating
(5 Max)

YTD Return

Elan (NYSE: ELN)

$13.0 billion





Shanda Interactive (Nasdaq: SNDA)

$2.6 billion





Reliant Energy (NYSE: RRI)

$8.2 billion





Foster Wheeler (Nasdaq: FWLT)

$9.9 billion





Service Corporation International (NYSE: SCI)

$2.9 billion





Sources: America Online, Motley Fool CAPS.

What's driven the heightened May performance of funeral home operator Service Corp International, given that for much of the rest of its year it seems to sleep? Certainly people don't just happen to die more often in May. You can see why we don't recommend using this as simply a list of stocks to buy or sell -- it's a platform for further research. Whatever the reason, Service Corp's three-star CAPS rating suggests investors haven't buried the stock yet.

Except for a few days here and there, thanks to the Federal Reserve, 2008 has been ugly for many stocks, but if May really is a month to shine, let's see which companies above might live up to that promise.

A passion for cures
Affecting the brain and spinal cord, multiple sclerosis impairs the ability of the body to send electrical signals causing muscle weakness, spasms, and worst of all, intractable pain. There is no cure for MS, but several treatments on the market can help. Biogen Idec (Nasdaq: BIIB) and Teva Pharmaceutical (Nasdaq: TEVA) have competing products, but one that holds much promise is Elan's Tysabri, which it co-markets with Biogen.

Yet as promising as it is, such drug treatments also have the potential of causing heart attacks in investors when there are adverse side effects; but that hasn't impaired investors' enthusiasm for these companies.

For example, CAPS investor bermudatrader mentioned earlier this year that the biotech will succeed not just because of Tysabri, but also because of its other drugs: "Solid alzheimers pipeline and the best MS drug on the market. Phase II results for AAb-001 come out this spring/summer, good data will propel this stock to the $40's."

Tysabri is pushing Elan forward, and the biotech says revenues ought to approach $1 billion this year, a successful drug by any measure. But there are still more markets to conquer here.

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