When you buy is just as important as what you
buy. Here's an example.
Earn 9% in 30 Days
Investors who held Internet stock Yahoo! (YHOO) would be
ahead about 4% if they had sold the stock last Wednesday (August 5)
after holding for a year. But they could have tripled that return if
they had held the stock for only one-month, specifically in November
2014. That is, if they had bought on October 31 and sold on November
30. In fact, holding Yahoo only in November would have been a
profitable trade in each of the past five years. You would have
averaged a 9% return each time, but your money would have only been
tied up for one month.
The relationship between the month of the year and a stock’s
price performance is called seasonality. Here’s
another example of how that works. Netflix (NFLX) has been a
hot stock by any measure, but you could have averaged a 43% return
each year simply by holding it during the past five Januarys.
Find Your Stock's Season
You can use
StockCharts.com to find the seasonality data for almost any
stock. From StockChart’s home page, select
Charts and then scroll down to the
Seasonality Charts section at the bottom of that page.
Entering a ticker symbol displays, for each month, the percentage of
years that holding the stock would have been profitable during that
month, and the average return for the month over the past five
years. For instance, when I checked
Walt Disney (DIS), I found that Disney would have been
profitable each of the five years (2011-2015)
in February, November, and December, but February, averaging 9.5%,
was the best month.
If you feel that five years isn’t
enough history to go by, you can use the
slider just below the Seasonality chart to
extend the measured timeframe for up to 20 years. In fact, you could
use the slider to select any 20-year period going back to 1990.
However, because 2008 and 2009 were abnormal
years, including them might distort your results. Consequently, I
suggest either not going back further than 2010, or skipping those
years if you do. Over the 2010 through
2015 timeframe, February was still the best month for Disney,
this time averaging an
Here are some other odds and ends that I found interesting by
checking various stocks.
Facebook, Blackstone & H&R Block
December, when it averaged 16% returns, would have been the
best month to own
Facebook (FB). On the other hand,
Blackstone Group (BX), which has been up in each of the
past five Januarys, averaged an
11% return for just that month. Owning
shares in income tax preparer
H&R Block (HRB) is a losing proposition in April, when you’d
think that it would do the best. Actually, January and October are
the best months to hold H&R Block.
Many factors other than seasonality could affect a specific
company’s share price. Even if the historical seasonality continues
into the future, this could be the year that your stock bucks the
long-term trend. Nevertheless, the information you can come up with
is interesting. Once you’ve started, you’ll probably check all your
stocks’ seasonality numbers. Why not? It’s free.