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If you are looking for a market sector with some serious seasonal trends, look no further than the energy sector.  In this article, I noted the bullish tendency for ticker FSESX during the months of February, March and April.  In this piece, we will add one more “favorable” month and then also look at a 6-month “unfavorable” period.

For the record, the information that follows is not being recommended as a standalone strategy.  It is presented simply to make you aware of certain long-term trends that have been very persistently bullish (or bearish as the case may be) in the energy sector.

(See also Why You Should Be Rooting for a Bullish January)

4 Favorable Months

*The four “favorable” months for our test are February, March, April and December

Figure 1 displays the growth of $1,000 invested in ticker FSESX only during these four months every year since 1986 versus simply buying-and-holding ticker FSESX.Figure 1 – Growth of $1,000 invested in FSESX only during Feb, Mar, Apr, Dec every year since 1986

Starting in 1986, an initial $1,000 investment grew to $76,019 (or +7,500%) versus $10,237 (or 923%) using a buy-and-hold strategy.

6 Unfavorable Months

The six “Unfavorable” months are June, July, August, September, October and November.

First the “positive” news:

*This 6-month period has managed to show a gain 14 times in 31 years – so by no means should you consider this period a “sure thing” loser

*During 4 separate years – 1997, 2003, 2004 and 2010 – the “unfavorable” months registered a cumulative gain in excess of +30%.

Doesn’t sound all that “unfavorable” so far does it?  But here’s the catch: Despite the occasional 30%or more gain, it is fair to refer to this 6-month period as “unfavorable” as the cumulative long-term results of buying and holding FSESX during these months has been nothing short of devastating.

Figure 2 displays the growth of $1,000 invested in ticker FSESX only between the end of May and the end of November every year starting in 1986.Figure 2 – Growth of $1,000 invested in FSESX only during June through November every year since 1986

Starting in 1986, an initial $1,000 investment declined to just $82, or a cumulative loss of -91.8%

Figure 3 displays some comparative data between favorable and unfavorable periods as well as using a Buy-and-Hold strategy.

Figure 3 – Comparative Results

Figure 4 displays the year-to-year results for a Buy-and-Hold approach versus holding only during the 4 “favorable” months or the “Unfavorable” 6 months.

Figure 4 – Yearly % +(-) for Buy-and-Hold versus 4 Favorable Months versus 6 Unfavorable Months

Summary

There is no guarantee from year-to-year results of buying and holding ticker FSESX during the “Favorable 4” months will show a gain and/or outperform the “Unfavorable 6” months. And there is by no means any guarantee that the “Unfavorable 6” will show a loss during any given year (note that 2016 saw the Unfavorable 6 generate a cumulative gain of +20.1%!).  So just remember that we are talking about some very long-term  trends here.

Still, most investors can discern the difference between:

*Favorable 4 months gain = +7,500%

*Unfavorable 6 months loss = (-92%)

This type of difference is what we “quantitative types” refer to as “statistically significant.”

Jay Kaeppel