Nokia's (NYSE:NOK) shareholders have lost 68.8% of their investment in the period of July 31, 2002 through July 18, 2013. Nokia has paid dividends of $4.81 per share for this period, which makes the total loss only 35%. There has been at least one trading system, however, that has produced an average of 12.7% annual profits.
Nokia has traditionally created peak earnings in the fourth quarter due to Christmas sales and lower earnings in the second and the third quarter. I chose the ideal holding period for Nokia's stock based on this seasonality. Nokia's share price is traditionally the lowest after the second quarter earnings announcement in the latter part of July and the highest after the fourth quarter earnings announcement in January. Based on this trading pattern, I chose the ideal holding period for Nokia's shares as the last day of July through the last day of January for a total holding period of six months. Here is a table demonstrating the results of this trading strategy:
|Year||July (last day)||January (last day)||Change%|
There have been just two instances which produced negative returns for this strategy during the last 11 years. During July 2008 through January 2009 this strategy resulted in a 55.1% loss and for July 2011 through January 2012 for a 13.1% loss. The average gain for the six month holding period has been 12.7%.
Here is another table demonstrating the results if you had invested $10,000 on July 31, 2002 and followed this strategy.
|Year||July (last day)||January (last day)|
If you had invested $10,000 on July 31, 2002 and followed this strategy you would have netted $13,358 or 133.6% for the money invested.
It will be interesting to observe if this trading strategy will continue to produce such consistent results compared to the buy and hold strategy. I plan to utilize this strategy for my own portfolio as long as Nokia's earnings show this same seasonality. Based on the historical data, I recommend buying Nokia on July 31 and I recommend closing this position at the end of January 2014.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NOK over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.