Looking at our risk-adjusted data since 1993, the tendency for a high yearly gain to predict further June gains stands out.  In  June 1999 and June 2000, gains of 11% and 30% could be gotten by purchasing the stocks with the highest 10% of yearly gains to that point, gains that far exceeded the general market.   Problem is, the approach is not sure-fire...it would have resulted in a 10% loss in June 1996, versus a relatively small decline in the general market.

The trend towards June gains via purchase of yearlong winners is strong in both halves of the month.  These winners also tend to perform relatively well in the third quarter.  However, stocks that rack up sizeable gains in late June tend to perform poorly in the third quarter.  The lesson seems to be:  you can hold on to the yearlong winners you bought at the beginning of June through the third quarter as long as they don't show extra zest in the closing days of June.

It's interesting to note that the other month in which the strategy of buying yearlong winners comes to the fore is December, six months prior to June.  In December, tax strategies (hold on to your winners and avoid capital gains taxes) are implicated in the effect...one would assume that similar mechanisms are at work here, at the year's midway point.

Our "dual" data shows that, historically, you could have stretched the above gains even further by combining these high yearly gains with recent short term losses.  Statistical significance is lost in the process, however, so we'd tend to stick with the strategy of simply purchasing stocks with high yearlong (252 day) gains.

The same "dual" strategy can be applied in terms of "industry momentum"...if the stock in question comes from an industry that has been strong over the last year, but weak over the last month, profits could be had.

June has been flat over the last 16 years (1993-2008), with big losses in 2008 overwhelming an otherwise positive trend.  Over the longer term, June performance has tended toward the negative.  Gains tend to occur in the second half of the month, meaning that the first half of June extends the doldrums of late May.  An exception was the first half of June 2003, which showed some nice gains.

Stocks with low volatility tend to perform better than one might normally expect, continuing a May trend and opening up possibilities for buying calls on these normally staid stocks.  This is not to say that volatile stocks underperform...they've done well in given years, particularly in the second half of the month.

Not surprisingly, yearlong losers tend to underperform in June.  This reverses the May trend of losers performing well.  The reversal isn't necessarily immediate or surefire though...in given years, losers have continued to perform well in the first part of June. In 2003, the top 4% of yearlong losers gained 11% versus the market's 2.7% (still, the top 10% of yearlong gainers beat the market, though not by a large enough margin to be included in our data tables for June of 2003).

In terms of industries, insurance stocks have done well in the period.  Oil stocks have underperformed...combining them with the strategy of buying yearlong winners will still result in June losses.  Semiconductors have performed well in given years, but not consistently enough to find themselves in our compounded data tables:  in 1999 they rose around 25% in the period.  They also performed well in 1995.  They perform all the better if they come into June with long-term gains.

Stocks that have performed particularly strongly or weakly in June on a historic basis are not featured in our tables of best June indicators.  However, we offer the following table of stocks with historically strong and weak June performances for those who enjoy such an approach to seasonality:

We also tested the S&P 500 from 1985 through 2008 for trends.  The trends mentioned above tend to persist.  Again, the data shows this is not the time of year to buy long-term losers...they'll probably continue losing.

One rather odd result from our longer term tests is that non-volatile large cap stocks tend to be particularly weak toward the end of June, despite the fact that the second half of the month has lost over this time frame.  In a losing market, non-volatiles are normally amongst the strongest stocks.  Note that this behavior can be said to be the reverse of what is often seen six months prior...non-volatiles tend to be surprisingly strong in December.

As indicated above, June definitely isn't the strongest month to be applying a seasonal strategy...last June's best group could be quite mediocre this year.  As always, studying seasonal trends can raise the probability of gains, but be sure to diversity across industries and strategies.

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