Saturday, April 28, 2007
Seasonality in the Stock Market: Part I
It's well known that "The Fly" often uses the monthly seasonality of stocks (along with the licking of illusive, prescience toads) to help him make his trading decisions. Given the fact that Fly's seasonality trades have generally been profitable, the study of monthly trends should help us become better stock pickers and more Fly-like. (But not at all in the 1986 Jeff Goldblum sense. You crazy?) In an effort to learn more about the potential opportunities afforded by seasonal analysis, this article seeks to briefly introduce the subject. With any luck, it'll add another valuable tool to your due diligence toolbox.
History suggests that some months are more favorable for investing than others. If you've been watching CNBC during the past week, you know that they've been spamming the phrase "sell in May and go away" ad nauseum. Sounds like a genuine piece of Wall Street wisdom, but does it work? Well, consider the following:
As the table shows, the historical statistics do seem to corroborate that pithy little rhyme. If you were indexed through those years, you certainly would have banked more coin had you only invested in the market during the "Nov.1 - Apr. 30" period. The month-to-month data also seems to lend credibility:
Admittedly, things don't look very bullish during the "May 1 - Oct. 31" period. So do the bears actually have a legitimate excuse for being the lamers that they are? I don't think so. After all, we're not really making bets on the profitablility of market as a whole. We're active portfolio managers who take on huge amounts of "benchmark risk" every single month with our hand-picked stocks. Broad weakness across the major averages certainly doesn't help us attain our daily dose of Grilled Chicken Buffalitos®, but I don't think that it makes any sense to pull out altogether. Instead of bailing out of "the greatest story never told," we should be able to find some good-looking individual stocks that have positive seasonality (despite the lousy seasonality of the market as a whole).
Can't wait to see some of your picks.
______________________________
Broker A-- I have to say this is one of the funniest thing I have ever read on the internets.
"Finally, I'm afraid today's spike in oil may disrupt the current Tech rally. However, I still feel my neighbor's are fat fuckers, who ought to sign up for NTRI's fat man diet."
"You must of learned English...." is not English at all. The correct usage is: "You must HAVE learned English....".
Because I understand the constraints on Fly's valuable weekend time, I will say to myself, "Fuck you maggot" to save you the trouble.
Good day.
"The Fly" did write "have."
You must be drunk or on heroin.
Back to online study material.
I must say, the structure of that sentence leaves plenty of room for improvement.
This tends to be a very difficult crowd to please, so I guess I must have done something right.
I'm going through the "red" for Insulet and find myself getting an enormous boner. I assume its going to be over-subscribed, upsized, and pricing raised.
I don't know who you have relationships with, but JPMorgan and ML appear to be co-book runners. Does anybody have any market color to share on Insulet?
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