There is seasonality in the financial markets and then there is seasonality in the financial markets. And then there is Hasbro (ticker HAS).

What follows is based on original work from Brooke Thackery.

Two Seasonal Trends in Hasbro

As a though experiment, let’s construct a simple 2-rule model for trading Hasbro (ticker HAS) using only a calendar.

Trend #1:

*If the current month is January through May OR October, November or December

THEN Trend #1 equals+2 otherwise Trend #1 equals 0

Trend #2:

*If today is the first or second trading day of the month OR today is one of the last 6 trading days of the month

THEN Trend #2 = +1 otherwise Trend #2 = 0

Putting these two trends together into a Model we can state that on any given trading day The Hasbro Seasonal Model can read 0, +1, +2 or+3

Does it matter?  You be the judge.

Results

All results use price only data starting on 12/18/84 through 5/31/2018.  No dividends, no commissions, no taxes.  A summary of cumulative results appears in Figure 1.

Figure 1 – Cumulative Results for Seasonally favorable and unfavorable periods versus Buy-and-Hold (12/14/1988-5/31/2018)

Figure 2 displays the “growth” of $1,000 invested in HAS when the Model = 0.

Figure 2 – Growth of $1,000 invested in ticker HAS only when the Model above = 0 (12/14/1988-5/31/2018)

Figure 3 displays the growth of $1,000 invested in HAS when the Model> 0.

Figure 3 – Growth of $1,000 invested in ticker HAS only when the Model above > 0 (12/14/1988-5/31/2018)

Figure 4 displays year-by-year results

Figure 4 – Year-by-Year Results

Before getting too carried away it should be noted that the Model > 0 Version of this experienced a maximum drawdown of -60% in the Crash of 1987 and has had three drawdowns (including that one in excess of -40% (for the record, buy-and-hold experienced a maximum drawdown of -75%!).  Let’s face it, most traders cannot (and probably should not) ride those kind of waves.

Summary

For the record, I am not “recommending” that anybody start actively trading HAS based on the calendar.  Sorry folks, “For Educational Purposes Only” here at JayOnTheMarkets.com.

That being said there are two important points to consider:

*The results – generated using nothing but a calendar – are pretty amazing (average 12 month % gain = +27%)

*The results are also extremely(!!!) volatile (standard deviation of 12 month returns = 35% with a maximum drawdown of -60% is NOT for the faint of heart.

Whether or not there is an actual trading opportunity here is a valid question and is not for me to answer.

The real point to consider is the underlying concept of seasonality and recognizing that the results detailed above (27% average 12 months) were generated using nothing more than a calendar.

Food for thought.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

There are a lot of ways to play this game.

For the record, I am a big believer in trend-following.  Picking tops and bottoms with any consistency is essentially impossible (at least in my opinion and/or experience).  So from that perspective going with the trend makes a lot of sense.  I am also a big believer in relative strength.  Much evidence over the years suggests that buying what is “already moving” is a very viable approach to investing.  Other studies have demonstrated pretty clearly that you are generally much more likely to succeed by buying stocks making new highs than by buying stocks making new lows.

These approaches make good sense and they work very well over time.  Despite this many (most?) investors still feel those pangs to “buy low” in hopes of getting in early and riding a major trend.  And the truth (I think) is that this can work too, if done correctly.

Like I said, there are a lot of ways to play this game.  But there is a definite “right” way and “wrong” way when it comes to “buying low.”

Buying Low (The Wrong Way): Buy things are plummeting or that have recently plummeted.

The Right Way (The Right Way): Buy things that have, a) plummeted, b) stopped plummeting and, c) have since been moving sideways for some period of time.

Last year I wrote about a “Buy Low” portfolio that I had concocted at the time.  Unfortunately, several of the ETFs involved have since ceased trading.  So in this piece I will introduce my updated “Buy Low” portfolio.  For the record – and as always – I am not “recommending” this portfolio.  It is essentially an experiment in one alternative approach to investing.

The “Buy Low” Portfolio

The Buy Low Portfolio consists of the following ETF’s and ETN’s:

CANE – Tecrium Sugar

JJOFF – Coffee Subindex Total Return

DBA – PowerShares Agricultural

WEAT – Tecrium Wheat

GLD – StreetTracks Gold Trust

PPLT – ETFS Physical Platinum Shares

SLV – iShares Silver Trust

GDX – Market Vectors Gold Miners

UNG – United States Natural Gas

URA – Global X Uranium

Monthly charts for these tickers appear in Figures 1 through 3.  A chart of the composite index I created by combining all of these appears in Figure 4 (Click any chart to enlarge).

Figure 1 – CANE/DBA/GDX/GLD

Figure 2 – JJOFF/PPLT/SLV/UNG

Figure 3 – URA/UNG

Figure 4 – Buy Low Composite Index

Summary

Securities that have plummeted in price and then moved sideways for a period of time can (unfortunately) continue to move sideways for quite a while longer before (hopefully) breaking out to the upside.  Even worst, they can also fail and breakdown through the previous low. But extended consolidation patterns are often followed by something good.

As you can see all of the tickers in the list above are commodity related.  As I’ve written about here and here there is reason to believe that commodities will outperform in the years ahead.  That being said, with the stock market rallying in the near-term and with the U.S. Dollar strong there is no compelling reason to think that this “Buy Low Portfolio” is going to make a lot of  headway anytime soon.

The Index in Figure 4 is presently 8.2% above its January 2016 low.  As long as that low holds I’ll give this experiment more time to work out.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.