The January Effect
The Motley Fool reports: Heard of the "January Effect?" This phenomenon seemingly causes stocks, particularly small caps, to surge in the first month of each year. The theory holds that investors and institutions sell in December for tax-harvesting reasons, then buy their former holdings back the following month, causing them to jump in price.
Can this explain the generally stellar January performance of financial institution Corus Bankshares? Whatever the reason, the CAPS community believes that each of these stocks has significant potential to outperform the market going forward.
According to data from Real Capital Analytics, as reported in The Wall Street Journal, sales of significant office properties plunged 55% to $7 billion in November. Major banks such as Wachovia and Lehman Brothers hold large amounts of commercial mortgage-backed securities (CMBS). At the end of last month, Lehman said that about half of the $79 billion in mortgages it holds are CMBS loans.
This weakening of the commercial markets could have short sellers betting that Corus shares will fall further. Roughly 67% of the bank's float is sold short, suggesting that investors foresee a tumble. But the high short interest has some CAPS players thinking that the high percentage of insider ownership can counterbalance the shorts.
View the full article on The Motley Fool: The January Effect
Posted by: Matthew Stone