Investors who held Internet stock Yahoo! Inc. (YHOO) would be ahead about four percent 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 nine percent return each time, but your money would have only been tied up for one month.
Here’s more information that you might find interesting. Netflix, Inc. (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.
The point is that profitable trades can be as much about when you buy as what you buy. The relationship between the month of the year and a stock’s price performance is called seasonality. You can use StockCharts.com to find the seasonality data for almost any stock. From StockChart’s home page, select Free Charts and then scroll down to the bottom of that page.
Entering a ticker symbol displays, for each month, the percent of years that holding the stock would have been profitable and the average return for that month over the past five years. For instance, when I checked Walt Disney Co. (DIS) , I found that Disney would have been profitable in February, November, and December of each of those years, but February, averaging almost 10%, was the best month.
Checking Long-Run Seasonality
Of course, five years isn’t much history to go by, but you can use the slider just below the 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, recent history is probably the most meaningful, so I wouldn’t suggest going back more than 10 years. Over that timeframe, February was still the best month for Disney, averaging a five percent return. Considering that going back 10 years includes down years 2008 and 2009, the lower February return number makes sense.
Here are some other odds and ends that I found interesting by checking various stocks. December, when it averaged 16% returns, would have been the best month to own Facebook, Inc. (FB). Netflix has been up in each of the past five Januarys, averaging an amazing 43% return for just that month. But this past January it only returned 29%. Owning shares in income tax preparer H&R Block, Inc. (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.
For tips and information on the best utilities and dividend stocks from Harry Domash, please check out Dividend Detective.
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