Earlier this year I wrote an article explaining seasonal investing for those new to this particular stock investing strategy. My attention is turned once again to the topic of seasonal investing now that Horizons BetaPro has launched a new seasonal investing ETF.
Moreover, the new AlphaPro Seasonal Rotation ETF (TSX: HAC) is managed by Canada’s foremost seasonal investing expert, Brooke Thackray.
Horizons AlphaPro Seasonal Rotation ETF
Horizons AlphaPro ETFs comprise Horizons actively-managed ETFs series. Unlike Horizons BetaPro ETFs, which merely track indexes (even when they are double bull- or bear-leveraged), AlphaPro ETFs use managers that move stock weightings around and also require more expensive management performance fees and bonus fees.
Name: Horizons AlphaPro Seasonal Rotation ETF
Inception Date: November 19, 2009
Eligibility: RRSP, TFSA, RRIF, RESP, DPSP, RDSP
Distributions: Annual, if at all.
Bonus Fees: 20% if beat market by 5%; plus a 5% annualized hurdle rate
Managers: Don Vialoux, Brooke Thackray
Just launched last week, it will be interesting to see the performance of this actively managed ETF going forward. I am personally wary of it, however, for all that Thackray’s seasonal strategies might be quite valid.
First, it is actively managed and for me, that goes against the original simplicity and advantages ETFs had over mutual funds (albeit this MER is still cheaper than most funds). Second, I don’t think that seasonal investing strategies carry enough weight for me to allow them to determine my own investing patterns at the moment. But I’m not saying seasonal investing and sector rotation is invalid. I certainly wouldn’t put seasonal investing in the same class as the moon cycles theory of investing, which I was pleased to learn about last week.
Seasonal Investing Strategies for 2010
According to Thackray, here are the basic seasonal investment trends for 2010 to watch out for during the holidays and heading into the first quarter.
The American Thanksgiving Trade
This is one I hadn’t heard of before. Since Canadian markets are open while U.S. markets are shut for the holiday, the lesser volume of trading activity means that it is easier to produce pops and gaps in trade — and Thackray says that typically he always sees about a 30-point rally on the Canadian markets over the U.S. holiday – whether it’s Labor Day or Thanksgiving. Thackray suggests getting in the day before the holiday and getting out the day after. He admits it’s very short-term, though – so it’s not for everyone.
The best six months for gold tend to be from July 12 through to October 9, although continued (but lesser) strength can be seen up until February (at which time you might want to rotate into oil (see below). We’re certainly seeing some of this now, with oil holding fast below $80 while gold continues to shoot up (albeit for a variety of reasons).
Canadian Banks’ year-end is at the end of October, unlike the U.S. banks – which means that a good time to buy tends to be just before Hallowe’en and through until about April 13. As the banks tally up their year-end earnings and special payments, news is factored into the markets and makes it a more liquid and potentially profitable time to get in and hold through to Spring. Thackray doesn’t count the lifecos in this group, however, because they behave somewhat differently.
Consumer Discretionary Stocks
Consumer stocks like Walgreens, Shoppers Drug Mart or Home Depot can be divided into staples and discretionaries. Staples are the companies from whom consumers continue to purchase even when times are tough – food products, basic household goods, etc. Thackray argues that these two groups tend to move in opposite 6-month trading cycles, so staples are strong when discretionaries are not.
According to Thackray, consumer discretionary stocks (like Home Depot and higher-end retailers) are the place to be between October 28 and about mid-April each year (at which point you would switch to staples instead).
Oil tends to be strong from February 25 to about May 9th on Thackray’s model, so all other things being equal, you might want to wait until February to place a major oil buy, or get in on a correction just before that time period. May is key here because it is the beginning of the driving season, but smart investors start placing their trades back in February when oil companies switch over from crude and heating oil into the production of gasoline.
Thackray warns not to lump nat gas in with oil, however, which has a very different market and seasonality. Nat gas typically does well between the end of July until the end of the year (of course larger influences are affecting the performance of natural gas right now).
Do you have any experience with seasonal investing? Are there other seasonal trends that you’ve noticed? I’d love to hear.
If you found this article useful, please retweet it on Twitter or give it a stumble on StumbleUpon. I’d also love it if you subscribe to my RSS feed for free tips and posts like this one delivered right to your reader or by email (posts are not for duplication).Related Posts
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