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You've probably heard of the January effect, the phenomenon that seems to cause stocks, particularly small caps, to surge in the first month of the year.
In theory, investors and institutions sell securities in December for tax-harvesting reasons, then buy them back the following month, bumping up prices again.
Yet what about other months? Retailers do better in some months because what they sell is seasonal. Some stocks even do better in May.
For whatever reason, investing based solely on the calendar is not a foolish strategy. Back-testing and data-mining can turn up nearly any causal relationship we want, if we search hard enough. Still, wouldn't it be great to know ahead of time when which stocks would perform best?
At MSN CAPS, more than 100,000 investors have weighed in on more than 5,600 stocks, awarding five-star ratings to the companies that command the most confidence. We've paired those opinions with data going as far back as five years to see which stocks performed best in each month.
The following five stocks seem to do best in May:
| Company | Sector | Market cap | Average return in May | Average return the rest of the year | CAPS rating (out of 5) |
|---|---|---|---|---|---|
Business services | $37.8 billion | 33.9% | 4.8% | **** | |
Semiconductors | $854 million | 19.7% | 0.3% | **** | |
Semiconductors | $12.2 billion | 21.0% | 2.2% | ***** | |
Memory chips | $6.2 billion | 12.0% | -1.1% | *** | |
Juices and snacks | $134 million | 14.7% | -10.8% | **** |
What's driving the stellar May performance of juice maker Jamba (JMBA, news, msgs)? In much of the rest of its year, the stock tends to go sour. While fellow beverage maker Hansen Natural (HANS, news, msgs) also tends to do well in May, soda jerk Jones Soda (JSDA, news, msgs) gets all bubbly in March.
Those kinds of anomalies are the reason we don't recommend using this information as a list of stocks to buy or sell -- it's intended as a platform for further research.
More from MSN Money and The Motley Fool
Analysts think Nvidia will face new competitive pressures from the other big-name chip makers this year. They've already cut their opinion because of a weak outlook on the economy and the potential for declining PC sales, which might compress Nvidia's margins.
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Yet some investors say, "Bring it on!" Top-rated CAPS All-Star "joekelly123," who on May 7 sported a 95.57 player rating, notes that Nvidia not only has some of the best products on the market, but also enjoys the loyalties of serious video gamers.
"I'm a gamer and it is widely recognized that Nvidia produces the best technology on the market," the All-Star wrote. "It is also fairly obvious that gaming as an industry is growing at an astounding rate. For gamers it's almost a necessity to own the most powerful card affordable and claim the bragging rights to go with it, no point in having the newest games if you haven't the rig to run it. There is tons of cash to be made selling high spec (high cost) peripherals to these fanatical gamers who would quite literally sell their grandmother."
But we haven't yet heard from you or your grandmother, and every opinion counts at MSN CAPS. Your voice affects the ratings on these stocks, whatever month the calendar may display.
This article was reported and written by Rich Duprey for The Motley Fool. At the time of publication, he owned none of the stocks mentioned.
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