Three Sector Funds for December

  • SumoMe

December has historically been a bullish month for the stock market. In fact, over the past 24 years, buying and holding an S&P 500 Index fund during the month of December would have netted a gain 20 times, or 83.3% of the time, with an average gain of almost +2% (+1.93% actually).  A lot of investors might be tempted to say “That’s good enough for me”, and who could blame them?

But there might be a way to do even better.

Certain sectors show historical tendencies to perform well during certain times of the year.  So let’s look at a simple 3 fund portfolio that has performed quite a bit better than the S&P 500 over the past 24 years.

The “December Three”

The three sectors are Biotech, Software and Home Construction.  Figure 1 displays some potential trading vehicles.

Sector Fidelity ETF
Biotech FBIOX IBB
Software FSCSX VGT
Home Construction FSHOX XHB

Figure 1 – Fidelity and ETFs

Results

For testing purposes we will use the Fidelity funds listed in Figure 1 as they have historical data going back much further than the ETFs listed.

Figure 2 displays the annual result of a portfolio split evenly between the three funds versus the S&P 500 Index.

Fid 3

Figure 2 – Annual Results: 3 Fidelity Sector Funds vs. SPX

Figure 3 displays the growth of $1,000 invested only during the month of December in the “Fidelity 3” versus the S&P 500 Index. Fid 3 chartFigure 3 – Growth of $1,000 invested in Fidelity 3 versus SPX (1990-2013)

Figure 4 displays the relevant comparative figures.  fid 3 results

Figure 4 – Comparative Results

A few things to note:

*The Fidelity 3 has gained an average of +4.21% versus +1.93% for SPX.

*The Fidelity 3 median gain was +2.52% versus +1.25% for SPX.

*The Fidelity 3 has showed a higher standard deviation, but also a *higher Average/Standard Deviation.

*The worst December for the Fidelity 3 was -4.99% versus -6.03% for SPX.

*Interestingly, the Fidelity 3 has been up 19 times and down 5, versus up 20 and down 4 for SPX.  However – and most importantly – the Fidelity 3 has outperformed SPX in 18 of the past 24 years.

Summary

So are biotech, software and home construction guaranteed to show a gain and outperform the S&P 500 this December.  Not at all.

But for an investor looking to “beat the market”, it certainly is “food for thought.”

Jay Kaeppel

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