July isn't a great month for the stock market. Over the past 19 years, the S&P 500 index has rallied in July (closed the month higher than it opened) 47% of the time, and it has just barely been able to eke out a profit over all those years. While the period of May through September typically isn't a great time for the stock market as a whole, certain stocks have shown a strong historical tendency to do very well in July.

If traders had purchased shares of Amgen Inc. (AMGN) at the beginning of July and sold them at the end of the month over the past 27 years, the average profit per trade would have been 9.62%. The 23 winning years (85% win rate) produced an average profit of 12.2%, while the four losing years resulted in an average loss of 5.21%. The maximum gain in July over this time period is 32.79%, while the biggest loss is 7.56%. These figures are based on monthly closing prices; therefore, gains and losses would have been larger during the month. (For more, see: Amgen's Woes: It Could Always Be Worse!)

Chart showing the performance of Amgen Inc. (AMGN) stock over the past five years

HCP, Inc. (HCP) has moved higher in the month of July during 22 of the past 27 years (81% win rate). The average profit on all trades, if the stock had been bought at the start of July and sold at the end of July, is 3.76%. This is despite an overall long-term downtrend. The 22 winning trades produced an average profit of 5.74%, while the five losing years resulted in an average loss of 4.96%. The biggest rally is much larger than the biggest July decline: 21.55% versus -7.24%. (See also: HCP, Inc. Q1 FFO Beats Estimates, Deleveraging on Track.)

Chart showing the performance of HCP, Inc. (HCP) stock over the past five years

Welltower Inc. (HCN) has moved higher in July during 20 out of the past 25 years (80% win rate). The average profit on all trades, if the stock had been purchased at the start of July and sold at the end of the month, is 4.01%. The 20 winning trades produced an average profit of 5.88%, while the five losing years resulted in an average loss of 3.5%. The maximum gain in July over this time period is 17.47%, while the biggest loss is 9.03%. Welltower also has the largest dividend yield in this group of stocks at 4.55%, but the ex-dividend date is not until early August. (For more, see: Welltower's Q1 FFO Meets Estimates, Revenues Beat.)

Chart showing the performance of Welltower Inc. (HCN) stock over the past five years

Harley-Davidson, Inc. (HOG) has a slightly lower win rate but impressive overall profitability in July. In 20 out of the past 27 years, the stock has moved higher in July (74% win rate). The average profit on each trade during this time frame, buying at the start of July and selling at the end, was 6.53%. This average is created based on 20 winning trades averaging 10.54%, while the seven down years averaged drops of 4.91%. The biggest gain in July was 39.41%, while the biggest decline was 11.5%. (See also: Is Harley-Davidson Joining the Ducati Takeover Race?)

Chart showing the historical tendency of Harley-Davidson, Inc. (HOG) stock to rise in July

The Bottom Line

Studying how assets move at various times of the year is called seasonality. Seasonality may provide trade ideas and places to look for trades, but it shouldn't be used in isolation. Ideally, other fundamental and technical factors indicate whether a stock is worth owning over the next month or more. While the statistics look good in hindsight, they only show the difference between the opening and closing price in July. The volatility and risk that occurred in between those prices could be much greater than what is captured by these statistics. It is advisable to risk only a small percentage of account capital on any single trade. (For related reading, check out: Company Analysis: How to Think About Seasonality Trends.)

Charts courtesy of StockCharts.com. Disclosure: The author does not have positions in the equities mentioned.

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