First, we discuss the second quarter, and then April-specific trends...

For the second quarter (first of April to the end of June), there are a number of strategies that have resulted in average gains greater than 8% per quarter since 1994:

*Buy cheap stocks (40%+ quarterly gains in 1995,1999, and 2001, and a whopping 80% in 2003 if you had chosen the cheapest 4% of stocks).

*Buy March losers, particularly those that lost in the closing days of March, or yearlong losers in general (80% gains in 2003!).

*Buy stocks with low market-caps.

*Buy REIT's and low-volatility stocks in general (the gains aren't spectacular, but risk is minimized).

*Buy stocks with a low "close - low" differential on the last day of March

On the short side...

*sell expensive stocks

*sell stocks with high market-caps

Since 1994, the quarter has been positive, averaging 6.3% gains.  The quarter is far from consistent, though.  2003 saw average gains around 27% per stock, and 2001 16%, while 2002 saw losses around 10%.

Banks have performed rather weakly in the second quarter.  Major losses were seen in 2007 and 2008, of course, but 1996, 1999, 2003, and 2004 weren't impressive showings for the industry either.

"Industry momentum" does not play a large role in separating the best and worst groups.  If such strategies have appeal to you, going with industries that have performed well over the last three months could be of benefit.  Stocks with industries that suffered on the last trading day of the first quarter also tend to prosper, but those whose industries have lagged over a week or more should be avoided.  These strategies are not particularly significant though.

The strategy of going with stocks that have historically performed well in the second quarter has not proven wise.  In fact, there's a tendency for last year's second quarter losers to rebound and outperform.  For this strategy's true believers, however, we offer the following table of stocks that have performed particularly strongly or weakly on a historical basis.

Investors who intend to hold over the course of the quarter should familiarize themselves with the rather dramatic "shift" in market attitude that tends to occur in June...losers go out of favor and yearlong winners become safer and smarter investments.

In terms of the month of April...

Again, the month has been positive, averaging about 3% gains since 1993.  Looking at our daily data, some of the most spectacular single day gains seem to occur in April...single day gains of greater than 15% if you just happened to purchase the right group of stocks at the right time (check out the performance of volatile stocks in early April 2001).

Unlike the second quarter, April gains have been reasonably consistent, with only 1997, 2002, and 2005 showing losses.  Cutting the month into halves, though, the gains are not evenly distributed...the first part of the month moves upward to the tune of .8% average gains, and the second half quite positive, averaging around 1.6% gains.

For monthlong gains...

*oil stocks perform well, continuing their big gains in March

*buy cheap stocks

*buy stocks with large yearlong losses, or those trading well below their prominent resistance levels.

*late March losers perform well.  If you had bought the 4% of stocks with the worst performances on the last day of March and held for every April since 1994, you'd have better than a 150% profit in 10 months of investing.  This is our most consistent April strategy.  Just another situation where the last day of a period predicts future performance, and more evidence for institutional churning.

On the short side...

*sell stocks with high March gains, particularly toward the end of March

*sell expensive stocks

Taking a look at the concept of "industry momentum", stocks whose industries were strong in March tend to continue to gain.  Stocks whose industries were weak on the last day of March also tend to gain.  These strategies take a backseat to those mentioned above, however.

As for the strategy of buying stocks that have been historically strong in April, this also works.  Again, it's not as significant as the strategies listed above.  The following table shows stocks with particularly strong or weak historical performances in April:

When we looked at the performance of S&P500 stocks, a more stable group of large cap stocks than those that we usually look at (the Russell 3000) in April from 1985 through 2007, the long and short strategies were generally the same...buy March losers and volatile stocks in general.

Cheap stocks also fared well.  If a stock split a year prior to the April period we looked at in this study, we simply tossed it as a source of data for the April period we were looking at.  In other words, the stock prices we looked at were the actual prices, with no split adjustments.  This tossing of stocks that have split may be considered a source of bias in the data...so be it.  The alternative is to split-adjust stocks, which introduces a new source of bias (artificially cheap prices).

In the first half of the month, you'd be focusing more specifically on March losers (winners if you intend to go short).  Of particular significance is the tendency for stocks that had a high "close - low" differential on the last day of March to lose.  Mining and banking stocks have done well in the first half, while medical technology and software stocks have fared poorly.

We also have a number of long and short "dual" strategies that have averaged very high gains/losses in the first half of the month, with strong significance.  Most of them couple a proprietary indicator with a more commonplace indicator.

In terms of industry momentum, coupling a weak one-month industry performance with a strong performance (as measured by a 100 day moving average) by a stock from that industry tends to produce losses.  In other words, don't count on stocks that have bucked their industry trends to continue to do so.  Stocks whose industries fared well in the first quarter, but whose industries suffered in the last week of the quarter, also tend to lose in the first half of April.

The strategy of purchasing stocks that have performed well in the first half of previous Aprils doesn't seem to have much effect.  There is, however, a trend toward last year's poor first half performers offering a repeat performance.

The second half of the month has been very positive, averaging better than 3% gains since 1993.  2000 and 2001 both showed general gains around 10% in this 10 day span, and 1999 and 2003 weren't far behind.  Undoubtedly, these big gains relate to April 15th, the American tax deadline, though we won't speculate on exactly what's happening.

The best way to play the second half is to invest in volatile stocks.  Going with this strategy has produced gains exceeding 20% in several years since 1993.  Buying the 4% most volatile stocks in every second half since 1993 would have resulted in a tripling of your investment over these 110 days.  It's also interesting to note that 1998's second half was a losing period, yet volatile stocks gained as a group.

"Industry momentum" doesn't seem to play much of a role in gains or losses in the second half.  

The strategy of buying stocks that have strong historical performances in the second half isn't particularly strong.  It's not that the strategy doesn't "work"...it's just that there a more efficient ways to make a profit at this time of year.

After risk adjustment, volatile stocks fall out of our second half lists.  Short term losers are still a good bet.  The first half industry focus reverses...banks perform poorly, semiconductors and software stocks take off.  Oils perform well.

Even after risk adjustment, though, buying non-volatile stocks remains near the top of the list of losing strategies in the second half.  We'd advise against shorting during this period...after searching through better than 50,000 "dual" strategies, we couldn't find a single one that consistently loses money.

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