Unleashing the Potential for Quick Profits in the Market’s New Year Surge.
As January approaches, seasoned investors are familiar with the phenomenon known as the “January Effect.” Traditionally, this concept focuses on small-capitalization companies, as explored in the original research conducted by Sidney Wachtel and published by the University of Chicago.
The January Effect can be a practical catalyst for your portfolio for several possible reasons. For instance, tax-loss harvesting is one such reason, where investors may sell specific positions to leverage tax losses before the year-end. Following this strategy, these same investors often repurchase the same securities in the new year, anticipating a rebound. Another plausible explanation involves investors using year-end cash bonuses to make investments in the subsequent month.
Key Elements of the January Effect:
Small-Cap Stocks Shine: Look for companies with solid fundamentals and catalysts that could drive their stock prices higher. Conduct thorough research to identify small-cap stocks with strong growth potential.
Tax-Related Selling Opportunities: Explore stocks that may have experienced tax-related selling in December. Tax considerations often lead to selling pressure in December.
Market Psychology: Understanding market psychology during this time is crucial for making strategic investment decisions. Monitor market trends, economic indicators, and breaking news that could impact your investments.
Three small-cap companies likely to benefit from the January Effect are Biote (BTMD), Grupo Televisa SAB (TV), and Virco Manufacturing Corporation (VIRC). All three companies are solid businesses poised to benefit from the January with the potential to create long-term wealth for share owners.
Biote Corp. (BTMD) specializes in offering hormone and dietary supplements for both women and men through physician practices in the southeastern United States. Although hormone health has conventionally been linked to women, there is a growing recognition of men’s health issues. Responding to this underserved market, Biote established a Men’s Health Division in June 2023. The company’s prospective expansion is fueled by plans to reach the rest of the U.S. and capitalize on the growing aging population. Current market capitalization is $366 million with 2024 revenue expected to rise from $190 million in 2023 to $220 million, a 16% increase while earnings also are expected to grow from $0.25 per share to $0.46 per share, an 84% increase.
Grupo Televisa SAB (TV) stands as Mexico’s largest telecommunications firm, extending its services to 20 million Mexican households and delivering broadband connectivity to 6 million customers. Not only is Grupo Televisa a prominent pay television provider in Mexico, boasting over 4 million subscribers, but it also holds a majority stake in Sky Mexico and a 45% interest in Univision. A notable catalyst for earnings growth in 2024 is anticipated with the U.S. presidential election. As both political parties actively court the Latino vote, constituting 18% of the U.S. population, significant advertising expenditures are likely to enhance Grupo Televisa’s financial outlook. Current market capitalization is $1.9 billion with 2024 revenues of $4.3 billion up from $4.1 billion in 2023, and earnings per share of $.14 in 2024 versus negative earnings per share of $.19 in 2003.
Virco Manufacturing Corporation (VIRC) specializes in designing, manufacturing, and globally distributing quality furniture tailored for the contract and education markets. Virco’s clientele spans a diverse range of facilities, including public and private schools, colleges and universities, convention centers, federal and state institutions, churches, and various businesses. VIRC has a market capitalization of $189.0 million with 2024 revenues of $267 million up from $231 million in 2023, a 16% increase while earnings per share of $1.35 are expected in 2024 versus earnings per share of $1.05 in 2003, a 29% increase.
Conclusion:
The January Effect is a hypothesis or a rule of thumb that can offer a promising window for investors to capitalize on quick gains in the stock market. However, it’s crucial to approach this opportunity with careful consideration and a well-informed strategy. By understanding the historical trends, identifying key elements, and implementing smart investment practices, you can confidently navigate the January Effect and potentially unlock swift financial rewards.