It’s the day after Thanksgiving, and I’m sure many of you are preparing for the holidays.
For my family, I take my kids to a local tree farm and pick out our Christmas tree for the year. It’s a little tradition I started with my son when he was a few years old, and he looks forward to it every year.
The ExodusPoint Partners International Fund returned 0.36% for May, bringing its year-to-date return to 3.31% in a year that's been particularly challenging for most hedge funds, pushing many into the red. Macroeconomic factors continued to weigh on the market, resulting in significant intra-month volatility for May, although risk assets generally ended the month flat. Macro Read More
This will be the first year my 3-year-old daughter tags along in the fun.
Traditions can be great, but they can also lose their luster.
The stock market has its own traditions around this time of year.
One in particular is the Santa Claus rally, which is the term for when stocks typically climb higher during December.
The name alone sounds fascinating, and there is some rationale backing up the Santa Claus rally. So I did some research into the phenomenon…
A cursory Google search confirmed the Santa Claus rally theory, and my research revealed similar results for the Dow Jones Industrial Average. Dating back to 1921, stocks rose 73% of the time in December, with stocks rising 60% of the time in the last week of the month.
What is concerning to me, however, is that the average return is minimal — just 1.2% for December and only 0.85% for the last week of the month. It’s hardly an opportunity I’m excited to take advantage of.
But there are other patterns in the market around this time of year that are worth getting excited about. Patterns that are worth including as part of your holiday traditions.
I’ll share one with you today.
Automatic for the Investors
While the Santa Claus rally turned out to be a waste of investment resources, earlier this year I uncovered and perfected a system for identifying stock market patterns that generate substantial returns — and one recent trade is poised to generate substantial profits.
The system is called Automatic Profits Alert, and the day after the U.S. election, it identified the GEO Group (NYSE: GEO) as an investment target.
GEO Group operates private prisons, correctional facilities and other rehabilitation centers. In August, the stock cratered 40% in a single day as the Obama administration sought to cut the number of federally funded private prisons.
Clearly, this was an added risk to the stock and would cut deeply into revenue and earnings.
But with Donald Trump as the president-elect, this agenda to cut private prisons will go away. In fact, it’s likely that Trump wouldn’t mind allowing more prisons to be privately run to get them off the government payroll.
That’s why GEO Group stock surged 20% the day Trump won the White House, triggering my Automatic Profits Alert system to enter a trade for the GEO Group.
Since then, GEO stock has continued to climb higher, netting subscribers a gain of more than 5% — but the stock has plenty of room to run further.
In fact, there’s another 20% above GEO stock before it reaches its August levels. And if Trump decides private prisons can handle more business, we could see a 30% to 40% run easily.
Who Needs Santa Claus?
In developing Automatic Profits Alert, I spent countless hours and market resources to discover certain market patterns where a specific sector performed the best out of the year. I call these prime seasons, and they are key to the system’s success in turning $10,000 into $1 million in just 10 years of backtesting.
The trade above — the GEO Group — is in the real estate prime sector that runs from now through May 5. What that means is that you simply buy it today, or next week, and hold it through May 5.
Of course, the rally won’t be without its bumps during this time, but odds are it will end nicely higher in May.
The real estate prime season was one of the most consistent in my 10 years of backtesting data, only showing a loss of 8% in 2012. Its average, though, based on identifying the best stock, is a 31% return.
Now that’s a stock market pattern I can get excited about.