The annual frenzy of anticipation that the final few days of the year could herald a stockmarket surge is a subject that gets dragged out more often than an old box of Christmas decorations. Yet the appeal of the so-called Santa Rally (and the January Effect) is that unlike some of the season’s worst kept secrets, there is at least some evidence that it really exists. So as we wait to see whether equities can end the year with a flourish, we investigated a few of Stockopedia’s high ranking shares for quality, value and momentum to see which might be well placed to offer some seasonal sparkle.
The Santa Rally is one of the most hotly debated of all the seasonal ‘effects’ among investors with an eye for market anomalies. For decades, year-end price rises have been credited to factors ranging from festive goodwill on the part of investors to fund managers rushing to ‘window dress’ their portfolios with the year’s hottest stocks. You can read more about it here. With markets already performing exceptionally well this year - and a correction in prices expected by many - a last minute rally may not be forthcoming. But using StockRanks it’s possible to find shares that may be better placed to withstand a fall in the market and perhaps even rise further on the prospect of brisk Christmas trading. But don’t forget, while momentum stocks have proved to be such a powerful force this year, they can correct strongly at the slightest whiff of trouble - so it is essential to research them carefully.
Seasonal stocks
Among the top achievers on this basis is micro-cap toy maker Casdon (LON:CDY), a family-run business with a limited free float but a StockRank that puts it in the top 1% of the market. It supplies a number of retailers - from John Lewis to Amazon - with the likes of toy replica domestic appliances like Dyson vacuum cleaners and George Foreman grills. In August the company said it was seeing rising order levels both in the UK and the United States, but investors will have to wait until next summer for an update on how this Christmas goes.
With a StockRank of 98, packaging business Macfarlane (LON:MACF) also tends to see a seasonal uplift…
