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Well Known Seasonal Trends

Readers are very likely aware of the “Halloween effect” or the Santa Claus rally. The former term refers to the fact that stocks on average tend to perform significantly worse in the summer months than in the winter months, the latter term describes the typically very strong advance in stocks just before the turn of the year. Both phenomena apply to the broad stock market, this is to say, to benchmark indexes such as the S&P 500 or the DJIA.


Hasbro: Seasonal Strength from February to April

I have picked Hasbro, a manufacturer of toys headquartered in Pawtucket, Rhode Island in the US.  Our readers  are very likely familiar with one of the company’s most famous products: the board game Monopoly, which  was originally made by Parker Bros.

Below is a chart showing the typical pattern the stock exhibits in the course of a calendar year.  These patterns  can be discerned at a glance on a seasonal chart, which is calculated by averaging the performance of the stock over the past 15 years. The horizontal axis depicts the time of the year, the vertical axis the level of the seasonal pattern (indexed to 100).

As the chart shows, Hasbro typically rallies very strongly in the three months to the end of April. On the other hand, the stock’s seasonal pattern shows that it usually tends to lose ground over the rest of the year.  The time period associated with the strongest seasonal performance is highlighted on the chart in blue. It begins on January 31 and ends on May 2.

Hasbro’s very positive performance at this time of the year diverges significantly from that of benchmark indexes such as the S&P 500 Index. In seasonal terms, the index barely rises in February, while – also in contrast to Hasbro –  it usually displays significant strength at the end of the year.

How frequent were rallies in Hasbro during the seasonally strong period? After all, it is theoretically possible that  an outstanding gain achieved in just one or two years was responsible for generating this strong average performance.


Hasbro Rose in 12 out of 14 Cases

The bar chart below depicts the percentage returns generated by Hasbro shares over the relevant time period from January 31 to May 2 in every year since 1998. Red bars indicate years in which negative returns were posted, green bars indicate years with positive returns.