What are seasonal stocks?
Certain stocks tend to do better on a certain season than other seasons and they are called seasonal stocks. For example, many retailer companies do well during holidays such as Christmas and New Years. People buy gifts for each other and that boosts sales every year on that season. Many gas companies do better during the winter season because more people consume heat and they get more profits.
How to invest in seasonal stocks?
When you invest in a seasonal stocks, make sure you study the past and make sure the pattern had repeated more than 2 times in the past in order to make a reasonable bet on a stock. Amazon, the largest online retailer do particularly well during the week of black Friday sale
11/17/2008 – 11/25/2008 – The stock went up from $39.69 to $42.19 for a 6% gain in 7 trading days.
11/17/2009 – 11/25/2009 – The stock went up from $131.25 to $134.03 for a 2.11% gain in 7 trading days.
11/17/2010 – 11/24/2010 – The stock market was close on 11/25 this year so I will use 11/24 as the last day. The stock went up from $158.35 to $177.25 for a 11.93% gain.
History repeats itself, and the risk reward ratio seems to be good for this stock. Make sure you add Amazon to your watchlist next year during this period. I would definitely buy it if I remember unless the general market is really bad.
