Low-priced stocks have their best performance, by far, during the first 10 weeks of the year.
Those that move up most strongly have the following typical profile:
* small market cap (< $150 M)
* low stock price (<< $5)
* low RS for last 12 months
* low RS in last few weeks of year, due to tax loss selling
* owned primarily by individuals
The purpose of this thread is to identify stocks that meet these criteria.
I will follow this mechanical timing formula:
* Buy halfway between Christmas and New Years.
* Sell everything by the first Friday in February, or earlier if the January Effect is particularly strong or weak.
This timing is based on historical average charts for low-priced stocks and on my experience in recent years.
I'll avoid:
- companies that are so unhealthy that they could go BK at any time
- BB stocks
- thin stocks
Similar threads I started the last four years were:
January Effect 1999
Subject 24490
My return, net of trading costs, was +11%, vs. nil for the Russell 2000. Here's my final report:
Message 7737621
January Effect 2000
Subject 32350
My return, net of trading costs, was +17% vs. +10.6% for the Russell 2000. Here's my final report:
Message 12781974
January Effect 2001
Subject 50376
My return, before trading costs, was +29.7% vs. +3.6% for the Russell 2000, assuming all stocks were bought on the last day of trading. Here's my final report:
Message 15290866
In retrospect, the optimal time to buy in December 2000 was about halfway between Christmas and New Years Day. By buying one day before the last trading day of the year, my portfolio would have returned +36.3% on paper, as compared to +29.7% for buying on the last day.
Midland, another poster on that thread, posted his picks and reported a return of +111%, net of 1 cent/share commissions, or +94% if all buys were done on the last day of trading in the year:
Message 15296872.
He attributed his superior results to several factors in his stock-picking method:
Message 15297778
He also suggested a volume criterion to avoid thin stocks: 10 day volume should be > 500k and 3 month volume > 200k
The January Effect in 2001 was 5X bigger than typical, according to a news story I read recently; the analyst quoted in that story attributed this unusual outcome to the bursting of the tech-stock bubble early in 2000.
January Effect 2002
Subject 52124
My return was disappointing. Before trading costs, it was -4.2% vs. +2.7% for the Russell 2000, assuming all stocks were bought at the close on Dec. 28 and sold the first Friday in February (returns would have suffered an additional 8.2% if I had waited to buy at the close Dec. 31). Here's my final report:
Message 17002775
Midland whipped me soundly for a second year, fetching a return of +15.7% for stocks purchased Dec. 28:
Message 17003213
He got his best results for stocks priced between $0.40 and $2.00 |
