Why do individual seasonalities deliver excellent results?
What are summer stocks?
Summer stocks, also known as "summer stocks," are shares of companies that seasonally benefit from a strong upswing in business during the summer months. They can be found in various industries, including tourism, leisure, retail, and more. The difficulty in finding such stocks is the nature of their seasonality and the specific risks associated with it. Still, buzzer stocks can be valuable to a well-diversified portfolio.
First, summer stocks are hard to find because they often come from small and mid-sized companies that operate in specific regions or niche markets. Because they are not as well known as large companies, they are not as heavily covered by analysts, and information about them may not be readily available.
Second, summer stocks are susceptible to sudden fluctuations because of the seasonal nature of their businesses. Weather-related factors, vacation season, and other seasonal influences can affect their sales. Therefore, it can be challenging to predict their long-term performance, and investors must be prepared to accept short-term volatility.
Nevertheless, summer stocks can be valuable to a portfolio, especially if they are well-researched and selected. At times when their businesses are thriving, they can generate above-average returns, presenting an opportunity for investors to boost their performance.
Summer Stocks also offer a way to diversify the overall portfolio. They can serve as a hedge and reduce risk because they differ from other stocks that may not be affected by seasonal fluctuations.
An excellent example of a summer share is NCLH (Norwegian Cruise Line)
In recent years, Norwegian Cruise Line Holdings Ltd. has struggled badly with the Corona measures. There have been capital increases and other unsightly things that we shareholders don't like.
Nevertheless, the share price has risen 90 percent in the last few years, from the beginning of August to mid-September. Only in 2016, there was a minus of -10%.
The following chart shows the seasonal pattern and the selected period.
The following chart shows the corresponding backtest from Aug 2 to Sept 17.
It is easy to see how well the share has performed each year during this period.
Overall, if selected wisely and integrated into a well-diversified portfolio, Summer Stocks can be an attractive way to capture the potential for above-average returns and protect the portfolio from seasonal fluctuations.
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