Seasonal Stock Plays

The most essential prerequisite for sound analysis is the ability to separate underlying trends out from the enormous cacophony of useless and often misleading background "noise." In the stock market, this requirement translates into the crucial importance of blocking out all market predictions. Oceans of ink are spilled daily by the intellectually and analytically incompetent in the ceaseless efforts to file copy and sell newspapers by grabbing the attention of the reader/investor via prognostications of forthcoming market "moves." In fact, as no less a sagacious investor than Warren Buffet himself has so aptly noted, the market is unpredictable.

In fact, we think there is a direct correlation between the amount of ink spilled and the inherent unpredictability of that which is "predicted।" Overall market predictions -- and especially short-term predictions -- are a complete waste of time, we think, save for those who earn an income by making them.

What then is "predictable?" How is one to make money in stocks?

To pose the question is to answer it , we believe। You succeed as a stock investor by carefully analyzing individual stocks and investing in those that you judge to possess the most favorable risk/reward ratio at any moment in time. One essential component of this approach is to RIGOROUSLY EXCLUDE all predictions/expectations of what the "market" will be doing.

In today's blog we wish to focus on the seasonal factor। For whatever reason, it is a very well-established historical fact that technology and biotek stocks produce most -- if not all -- of their gains in the autumn. Thus, while September is statistically the worst month of the year, it is frequently a very good month for tek stocks. Despite sometime extreme market volatility in October, October too is frequently a good month for these sectors. Finally, the November-January period ususally constitutes the prime season for these stock groups.

We do not believe that tek and biotek stocks will deviate much from the norm this year. Consequently, we think these groups are odds-on favorites to perform well over the next 4-6 months. Coincidentally, in the current season, valuations in these sectors are a good deal lower than usual, and earnings prospects are decent.