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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 * low stock price * 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 as early as the first week of January if the January Effect (and preceding tax-loss selling) 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, including stocks with terribly negative working capital and cash burn, and mfg. co.'s with a debt/mkt cap > 2 - 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 Note added December 30, 2002: My picks appear in the portfolio below. January Effect 2003 Subject 53512 My return was up 4% for the paper portfolio, while in my real-dollar account I netted about 2 or 3% after commission. There wasn't a strong January Effect this year, and there wasn't much tax-loss selling in December, either. The rest of the year, though, was amazing. My picks, which I unfortunately no longer owned, gained 198% by Dec. 2, 2003. That's because in 2003 the market went up and beaten-down small caps went up a lot. January Effect 2004 techstocks.com I bought nothing for this time, because I was unable to find any attractive opportunities. The reason is that 2003 was a big bull market after several years of bear markets. Few stocks went down in 2003, and few investors had tax gains to offset. I'd guess it will be different in 2005. | ||||||||||||||
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