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Frank Zorrilla is the founder and chief investment officer of Zor Capital LLC.He began his Wall Street career 10 days after his 20th birthday when he became a Series 7 licensed stock broker.

January Effect

by ZorTrades on January 6, 2012

in Stocks

5 days into this new year and I have already seen 2,012 blog posts about the January effect and the stats, and the stats, and the stats, and how the first week foretells what will happen for the rest of the year–blah,blah,blah.  One piece of data that does peek my interest is the type of stocks that outperform this month, and how some of last years biggest losers might have a lift off after the new year starts when the tax selling is over. Mark Hulbert from Marketwatch wrote a great piece on” how to play the January effect and how only the smallest stocks tend to shine in January.  On the contrary, that research found that seasonal strength right after New Year’s was concentrated among the stocks of the very smallest companies. Among the larger-cap stocks that dominate the major benchmarks, such as the Dow Jones Industrial Average and the S&P 500 index , there is no tendency for above-average strength during January”. AND-  ”The stocks in the smallest-cap decile are very small indeed, with an average market cap of about $100 million. That’s not just tiny, that’s minuscule. Very few of the stocks you hear about are this small”. With that being said, I took a look at the 20 biggest winners in the Russell 2000 this year to see what we can find some common characteristics. Here is what we found; 18 out of the 20 were down last year. 16 out of 20 have a market cap of less than 500 million dollars 15 out of the 20 trade at $10 dollars or less Here is the bottom line; within the Russell 2k they are about 300 stocks that were down 40% or more last year and since last years losers seem to be working this month–then why not try to find a diamond in the rough. SOURCE: JANUARY EFFECT

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January Effect


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