OK, I will admit I am a bit late with this one. I’ll go ahead and blame “The Holidays”. Anyway, if you were wondering when it might be a good time to hold real estate stocks, the answer might well be, um, “Now”.
(Jay Kaeppel Interview at BetterSystemTrader.com)
Favorable Seasonal Period for Real Estate Stocks
*A favorable seasonal period for real estate stocks tends to occur between the close of the 14th trading day of November (back on 11/19/15 this year)
*The favorable period extends through December 31st of the current year
We will use Fidelity Select Real Estate (ticker FRESX) as a proxy. However, other funds and ETFs are listed a little later. Figure 1 displays that growth of $1,000 invested in FRESX only during the November-December period listed above since 1988.
Figure 1 – Growth of $1,000 invested in FRESX during Seasonally Favorable Period (1988-2015)
Figure 2 displays the year-by-year results
Figure 2 – FRESX +(-) during Seasonally Favorable Period (1988-2015)
For the record, this period as seen:
*A gain 26 times (96.3%)
*A loss 1 time (3.7%)
*Average %+(-) = +6.25%
*Median %+(-) = +4.16%
For the record, a 96% success rate is what we “quantitative analyst types” refer to as “statistically significant”.
A Few Alternatives
Beyond FRESX traders might also consider:
*ProFunds Real Estate fund (REPIX)
*Rydex Real Estate fund (RYRIX)
*iShares Dow Jones Real Estate ETF (IYR)
*Vanguard REIT ETF (VNQ)
Summary
Like I said, I am a little late with this one. As of 11/27 FRESX was already up +2.1% from its close on 11/19. So is it already too late to get into real estate stocks?
It beats me.
As I always say, the one “catch” with using seasonals as a stand-alone strategy is that there is never any guarantee that a particular trend with work “this time around”.
Nevertheless, as a wise man somewhere probably once said, “96.3% is 96.3%, what more do you want from me?” So short-term traders might consider looking at any short-term weakness in real estate stocks as a potential buying opportunity.
(Jay Kaeppel: Portfolio Manager for New Investment Program)
Jay Kaeppel
Jay – heard your interview on Better Systems Trader podcast.. great information — thank you. I don’t think I heard you talk about it but I was wondering if there is any reason you suggest using mutual funds rather than ETFs (SPDRs or iShares) for season sector trading?
Thanks for the comments. Not necessarily saying that mutual funds are better than ETFs. But two potential advantages: Fractional shares and no commissions. i.e., if I have an account with $6,342.52 I can put all of it into a mutual fund. To buy an ETF I have to divide that number by the ETF share price to figure out how many shares I can buy. Also, Profunds (for example) there is no commission as you might pay to buy shares of an ETF in a stock account. Jay