The Santa rally and some stock pickers for the Christmas stocking

28th November 2013

The Santa Rally is a concept or phenomenon that involves a surge in share prices that often occurs in December and particularly in the last two weeks of the year. As with other calendar and festival based predictors there may not be much scientific about it unless of course behavioural factors are taken into account.

However it looks as if there is definitely something to it. Hargreaves has put out a Christmas note about it with the following facts.

–          the FTSE All Share has delivered a positive return in 26 out of the past 27 years

–          over the last 27 years the FTSE All Share returned an average of 2.6% in December

–          best Santa Rally was December 1987, the FTSE All Share returned 10.0%

It also suggests the following explanations –

Fund managers are repositioning their portfolios ahead of the end of the year

People are investing their Christmas bonus

Seasonal cheer, no-one likes a pessimist at Christmas

However maybe it one time in investment when worrying about the cause isn’t all that important.

Adrian Lowcock, Senior Investment Manager at Hargreaves Lansdown says: “Whatever the cause, the Santa Rally is one of the most visible trends in stock markets. The effects often last into the New Year. However, in the long term markets return to reality and focus on the most important factors which determine stock market performance such as company profits and economic outlook.

“Christmas can be a good time to sit down and review your portfolio and consider putting money to work in the market.  Investors should continue to focus on good quality managers who can add value throughout the year and not just at Christmas. Stock pickers should be able to add significant value and help investors’ portfolios outperform over the longer term.”

Anyway amid the Chistmas cheer Hargreaves suggests some stock pickers for that Christmas stocking.

Giles Hargreave  

Giles manages a number of funds including the Marlborough UK Micro Cap Growth fund. Our analysis shows that stock selection has been the main reason for the Marlborough UK Micro Cap Growth returning 246% over five years whilst the FTSE Small Cap has returned 158%.

Nick Train / Michael Lindsell

Nick Train and Michael Lindsell manage the Lindsell Train UK Equity and Lindsell Train Global Equity funds. The managers run a concentrated portfolio of around 25-30 holdings. This approach means each holding can make a real difference to performance, although it does increase risk

Leave a Reply

Your email address will not be published. Required fields are marked *