September 2, 2009 | Posted by Vitaliy Katsenelson

September – the worst month for stocks

October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February.

-Mark Twain

September 1st is a very strange day for me. In Russia the school year across the whole country started on September 1st. I vividly remember myself as a child on that day throughout my childhood. The sun always shined brighter that day, the cleanliness of my uniform was at the year’s high, it was custom to bring flowers to teachers on that day thus the school smelled like a botanic garden. Every year I promised myself that I’d be more serious, to smile less and make fewer jokes. Teachers did not like my smile or my jokes, always called me a class clown. Every year I failed at these goals. Thank God!

This introduction has absolutely nothing to do with what I am about to discuss except that today is September 1st, the beginning of September and historically has been the worst month of the year for investors. After I looked at the data from 1900 to 2008, it is safe to conclude that September historically was the worst month for investors, period. Stocks average and median returns were -1.16% and -0.56%, respectively. Far worse than any other months. In fact with the exception of June where median returns were down 3 basis points, no other month of the year had negative median returns than September. In 63 out of 108 years September brought negative returns to investors, greater than any other month.

It gets worse, when returns in August were greater than 2% average and median returns in September were -2.29% and -1.44%, respectively. I’ll be honest I have no idea why this happened or what this September has in store for us. Maybe investors don’t like the end of summer and the first months of fall. Maybe if some of your stocks a hovering close to fair value you sell now? Or maybe if you were looking to buy a stock you wait a little?

Vitaliy N. Katsenelson, CFA, is a portfolio manager/director of research at Investment Management Associates in Denver, Colo. He is the author of “Active Value Investing: Making Money in Range-Bound Markets” (Wiley 2007). To receive Vitaliy’s future articles my email, click here.

Short URL: http://ContrarianEdge.com/?p=1211

http://artofleaders.blogspot.com anthonymallgren

I guess it is a glass half empty/half full scenario. For value investors looking to fill the last half of the glass, September is ideal. People are beginning to think about the holidays and need more liquidity. This has held true throughout the history of the US, and was one of the originally reason why the Federal Reserve was created. The liquidity in commercial bank begins to dry up, continue to ebb until after the holiday season.

If you are looking for cheap Chinese stocks, there are a few great ones out there in the form of ADRs. Just take a look at TBYH, which recently had it’s original management who was responsible for it’s growth after less than 1 year after their departure. Red ink has been showing up as a result of write downs of doubtful accounts receivable categorized under G & A expenditures. If liberaly credit policy had never been enacted, the company would have remained profitable. Once the doubtful accounts have been purged from the balance sheet, the EPS is surely bound to shoot up above the prive of the stock and cause the price to return to normal levels.

Perhaps September provides opportunities to profit in July rather than the threats of a plummeting portfolio, but I just it all depends on your perspective.
Daniel M. Ryan

Myself, given how much talk there’s been about the September effect, I sometimes wonder if the near-term bears are going to be treated to a huge head fake in the form of a trading range.

But not much wondering, though. Valuations have gotten ahead of themselves.

September – the worst month for stocks

Recently Commented

Recently Added