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 (NASDAQ: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 Free 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 (NYSE: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 8.9% return.
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 (NASDAQ:FB). On the other hand, Blackstone Group (NYSE: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 (NYSE: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.
Disclosure: I am/we are long BX.