Strong January redux

purple: SPX; black geometric average of top 10 SPX stocks in 2004.

A prior post set forth the theory that strong January performance in an S&P500 stock foreshadows year-long outperformance. Above is the performance of the 10 best SPX stocks in 2004. Note that in 2004 strong January performance was associated (on the whole) with strong year-long performance.

Naturally, not every stock that makes a high in January will be a blockbuster. However, a good strategy may be buying a basket of SPX stocks that make January highs and then selling the laggards as the year progresses.