Join Graham LIVE at 1 p.m. ET on Saturday for his top 2 ‘On the Clock Stocks’ for the rest of January — and the dates they’ve risen every year for a decade!
Dear Fellow Investor:
It’s an interesting time for these markets. The ongoing sell-off has pushed technology stocks to near oversold territory, while the rest of the market continues to hold up.
The fourth quarter 2023 rally was so strong and so furious that the S&P 500 is just now only breaking under its 20-day moving average. Its 50-day moving average is still a long way down.
With that said, one of the most well-known anomalies in finance isn’t happening this month… And that’s a shock to most investors. In fact, four of the anomalies best associated with the financial markets are facing an upheaval. And if you’re still trying to trade around these historical anomalies… it’s likely going to cost you money. Let’s take a look at these four failing phenomena.
The January Effect is Useless
Historically, the stock market has performed very well in January. This is known as the “January Effect,” a trend where stocks — especially small-cap stocks — outperform in the first month of the year more than any other period. Most historians of the market argue this happens because sellers take money off the table in December and start buying aggressively in January.
But over the last two years, this has failed. In January 2022, there was a dramatic sell-off in the wake of the Federal Reserve’s minutes from its December 2021 meeting. And the sell-off this week has been fueled largely by a huge decline in small-cap stocks on the Russell 2000. Be careful in the next few weeks, as the trend is clearly negative.
The Monday Effect
The argument goes that returns on Mondays are significantly lower than where they are on Fridays. The belief is that weekend news can fuel a sell-off. But interestingly, the markets in 2023 were not in a “Buy on Friday and sell on Monday” mode.
Actually, while Friday was the best day, Monday was close behind. It was Wednesday that saw the largest amount of selling, likely fueled by big downward moves in the market during events around the Fed. Again, the data was incomplete to suggest that Mondays were not the best time to hold a position.
Sell in May and Go Away
This is one of the oldest adages in the financial markets. It’s the belief that a seasonal anomaly is in play and that investors should just walk away from the equity markets until the end of October (from right around Memorial Day).
Except, it hasn’t been May as the month to sell. It’s been late July or mid-August.
In the last two years, the markets have experienced dramatic rallies from oversold or weak territory during the months of May and June. Large squeezes in low-volume months have provided investors with an opportunity to make contrarian gains during this period.
Small Cap Outperformance
The size effect is the long-term observation that smaller companies have historically outperformed larger-cap stocks. Naturally, smaller-cap stocks carry greater risk, and thus greater reward. But in the post-COVID era, funds have gravitated around — and crowded into — mega-cap technology stocks to propel their gains. The +100% gains of the Magnificent 7 tech stocks blew away the Russell 2000 in 2023.
And they’ll probably do it again this year.
What Anomaly Actually Works?
There’s one anomaly that really works. And that’s the value effect.
This is the simple analysis that over the long term, companies that trade at very low enterprise values to their earnings before interest and tax, or companies with high Piotroski scores and low price to Ben Graham numbers have outperformed the market.
These names offer great long-term potential, and ensure that investors can take advantage of stocks with lower downside and greater upside. This is how we identified a company like Skywest Inc (Nasdaq: SKYW).
On Jan. 5… last year… I recommended Skywest in these pages when it was trading for $17.43 per share. Last night, shares popped to $51.48 per share. All we did was focus on deep value metrics with strong management and great financial performance.
That was a 195% return in a year.
Value is at the heart of the Tactical Wealth Investor portfolio. And this Monday evening, we’ll be releasing the next name in our Value Portfolio. I believe the name we’re adding to the portfolio has the same level of upside in the year ahead.
Largely because it’s in an underappreciated sector that will be at the heart of the economy in the next 18 months: global shipping.
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
There’s a strange market phenomenon that very few traders know about….
Certain stocks have gone up on the same days every year for the past decade, over and over again without fail.
And anyone privy to these tickers and dates can play these stocks with options for the chance at outsized returns.
While we can’t guarantee future returns or against losses, the power behind these “On the Clock Stocks” is undeniable…
And Graham wants to give YOU his top 2 On the Clock Stocks for the rest of the month of January at absolutely no cost to you!