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Buy No Stock Before Its Time

With the summer driving season moving into high gear, you’d think that this would be a good time to buy oil refinery stocks. But you’d be wrong!

Take Valero Energy, for instance. Unlike the biggies such as Exxon Mobil, which are involved in every aspect of the energy business, Valero is strictly an oil refiner (refiners convert crude oil into gasoline). So, how has Valero’s stock fared over the summer driving season?

Over the last nine years, you would have averaged a 6% loss if you held Valero for just one month, July, in each of those years. The rest of the summer isn’t much better. You would have averaged a 2% gain in August and broken even in September.

For Every Stock, There's a Season
Instead of the summer months, the best month to hold Valero is March, when, since 1998, it has averaged a 10% return for the month. February, averaging an 8% return, is the second best month.

Here’s another surprise. Google, up more than 400% since its April 2004 debut, has been good to its shareholders. But not in February, when, averaging a 10% loss, it has dropped in each of the three years since its IPO. By contrast, October has been great for Google shareholders, up each year and averaging a 28% gain.

These examples illustrate that when you buy can be just as important as what you buy.

Info Readily Available
I didn’t spend hours tabulating this information. It’s available free on AOL’s finance site, and as is the case for everything on AOL, you no longer have to be a member to access the information.

You can find AOL’s monthly return data from its homepage (www.aol.com) by selecting Money & Finance and then entering your stock’s ticker symbol. Then select Performance, and finally, average monthly returns.

AOL lists the monthly return data going back to February 1986, if the stock has been traded that long.

Longtime readers may recall that I described this feature a couple of years ago, but AOL has improved its functionality, making it worth mentioning again.

For each stock, AOL displays a Barchart showing the average monthly returns, along with the number of years that its share price gained, and the number of years that it dropped, for each month. That’s important because the average monthly return figures can be skewed by one or two exceptional years, either good or bad.

For instance, the report for Chico’s FAS shows that the women’s clothier has gained 9%, on average, over the past 14 Januarys. However, that figure was distorted by a couple of unusually strong years. Chico’s actually dropped in 7 of the 14 Januarys, reducing the odds of winning to only 50/50.

Placing your mouse over a particular month displays a list detailing that month’s returns for each year. That feature also helps to interpret the information. For instance, Valero’s negative average return for July that I mentioned earlier was mainly due to big losses during that month from 1998 to 2002. Starting with 2003, Valero has registered small gains (still only around 2%) in July.

Not Perfect - But Useful
AOL’s monthly returns reports have some glitches. They don’t cover every stock, and they occasionally omit the monthly detail for certain stocks. Nevertheless, the reports can be a treasure trove of worthwhile information. Here’s a sampling.

  • Intuit, as you probably know, makes Quicken and QuickBooks, mainly used to produce income tax returns. Thus, it came as a surprise when I found that Intuit’s stock usually drops during the January-April tax season. 

  • Clothing retailer GAP’s share price has mostly gone nowhere for years. Yet you could have made money by holding GAP in November when, averaging an 8% return, it was up in 18 of the past 21 years. Watch out for September though, when GAP has suffered losses in 13 of the past 21 years.

  • November is the best month for shareholders of Internet retailers Amazon.com and eBay. Amazon has been up in 7 of 10 Novembers (15% average gain) and eBay scored gains in 6 of the 9 Novembers (up 22%) since its IPO. However both typically drop in February. For instance, eBay, averaging a 7% loss, has been down in 8 of 11 Februarys.

  • Technology stocks such as Apple, Intel and Microsoft usually score their biggest share price gains in January. Apple, for instance, has scored gains in 15 of the past 21 Januarys.

  • Curiously, global positioning system maker Garmin’s shareholders have the opposite experience. Garmin has dropped in 5 of the last 6 Januarys. Its best month is December when it has been up 5 of the past 6 years (13% on average).

  • Restaurant stocks as diverse as McDonalds, Cheesecake Factory and P.F. Chang’s usually move up in March and drop in September.

I don’t know why restaurant stocks usually move up in March while Intuit’s stock drops, or why GAP drops in September, but gains in November. Even if these patterns continue into the future, they don’t happen every year. This could be the year that your stock bucks the long-term trend.

That said, AOL’s monthly returns report is worth adding to your analysis toolbox.
published
7/8/07

 

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