Fall Declines Offer Investors Low-Priced Stock Opportunities
Labor Day traditionally signals the end of summer. On Main Street vacations end, the swimming pools close, and kids go back to school. On Wall Street, analysts return to their desks.
However, for some reason, when analysts go back to work, they look more critically at their investment recommendations-and apparently tend to not like what they see. The traditional summer rally thus comes to a halt, with September being the weakest month of the year. October also has been known to serve up some nasty surprises.
However, as they say, one person's pain is another person's gain, and that proverb is especially true on Wall Street, as the stock market enters a period when falling stock prices can give an old-fashioned stock picker much delight in being able to buy stocks around their lows.
And nowhere is the opportunity for stock picking better than with low-priced stocks, as the seasonal weakness in these stocks extends well into November, followed by some rebound in December and then the traditional huge rally during the first quarter of the new year, commonly known as the January effect.
I've discussed the January effect before. It doesn't require too much thought to understand why this anomaly exists.
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