August has gained around 1.2% per year since 1993, and a tad less if you go back to 1983.  Strong gains in 1993, 1994, 2008, and 2009 are largely responsible for the positive nature of the month. The first half of the month tends to lose slightly, while the second half is more likely to show the kind of volatility that might result in noticeable gains or losses.  Many of the strategies for increasing your odds for a more sizeable gain resemble those for July:  buy stocks with recent losses, or high yearlong gains.  The latter strategy was particularly strong in 1993, 1997, 1999, and 2000.

Good strategies for the first half of the month include buying stocks with late July losses, particularly stocks with a high "high-close" differential on the last trading day of July.  Shorts can simply reverse these strategies...sell stocks with strong July finishes.

Again, avoiding volatile stocks isn't necessarily the best way to gain in the month...our data shows that it's stocks with mid-range volatilities that have suffered most in the average year.  Volatile semiconductors have actually fared rather well in the period (check out 1994, 97-99, 03), though they've also suffered big losses in given years (e.g. 2002).  Biotechs have fared better than average in the second half of the month, with the gains continuing into September. On the other side of the volatility coin, gas and electric utilities have also fared well.

Banks lag, particularly in the second half of the month.  Large-cap retail issues should be avoided.

Looking at our seasonal charts, one sees that gold enters its strongest period of the year at the beginning of August.  This trend ends in late September.

In experiments that we haven't bothered to post (the results aren't insightful), stocks that had a history of faring well in August showed only a weak tendency to continue on that path in upcoming Augusts.  Stocks that have been historically strong in the first half of the month have also shown a slight tendency toward repeat performances.  For fans of such strategies we offer the following table of stocks that have performed particularly strongly or weakly on a full month historic basis.

The concept of "industry momentum" doesn't play much of a role in gains and losses in the month.  There does seem to be a slight tendency for stocks in industry groups that gained nicely on the last day of July to continue to gain in August, but the level of significance is such that this result could be more of a fluke than anything else.

Looking at our seasonal charts, there's a real paucity of charts where stocks seem to reverse a negative course in August...this isn't a month where stocks "become timely", at least on the buy side.

When we looked at S&P 500 data over the period 1984-2005, some of the above trends were retained, but a few disappeared.  Volatile stocks outperformed as would be expected, but the group of yearlong losers displaced yearlong winners as strong performers.  In fact, yearlong winners performed rather poorly in this test...this is certainly the biggest discrepancy we've noted between 1984-2006 S&P 500 monthly performances and 1993-2006 Russell 3000 monthly performances.  Note, however, that a trend toward gains in yearlong winners drawn from the S&P 500 emerges nicely in September.

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