5 Small-Cap Stocks to Play the January Effect
Wall Street had a disappointing start to 2024 as the nine-week winning streak snapped, erasing some of the strong gains seen at the end of 2023. Overstretched valuations and uncertainty around when the Fed will begin to cut rates have dampened investors’ optimism. The decline was broad-based, with small-cap stocks plunging the most.
The Russell 2000 Index declined 3.7% in the initial week of 2024. The trend might reverse, given what is called the “January Effect," which refers to a seasonal increase in stock prices during the month of January. This phenomenon is often observed in the stock market, where, historically, stock prices have shown a tendency to rise more in January than in other months.
For investors looking to capitalize on this opportunity, small-cap stocks that are down in double digits in the initial week of 2024, have a solid Zacks Rank #1 (Strong Buy) or #2 (Buy) and a Momentum Score of B or more seem solid choices. These include Anavex Life Sciences AVXL, Peakstone Realty Trust PKST, AC Immune SA ACIU, Getaround, Inc. GETR, and Akoya Biosciences Inc. AKYA.
Is January Effect a Myth or Reality?
According to some market experts, the January Effect actually runs from mid-December through February, with small-caps continuing to outperform their large-cap cousins.
While the start of 2024 has seen some deviation from the expected January Effect, the year-end tax considerations, and investment of year-end bonuses will push the stock market higher in the first month of the year. Investors also redeploy their capital to speculate on weaker performers in January after selling winners in December to create tax losses. Further, the start of a new year often brings renewed optimism among investors, leading to increased buying activity.
Over the long term, small-cap stocks have generally shown stronger performance in January compared to large-cap stocks. However, this trend is not consistent every year, and there have been several years where the January Effect was minimal or absent. It has become less pronounced in recent years due to changes in tax laws and the increased use of tax-advantaged retirement accounts.
Stocks to Buy
We have profiled the abovementioned stocks here:
Anavex Life Sciences is an emerging biopharmaceutical company engaged in the discovery and development of novel drug targets for the treatment of cancer and neurological diseases. The stock saw a positive earnings estimate revision of 4 cents over the past seven days for the fiscal year ending January 2024. AVXL has a market cap of $493.3 million and has plunged 35.4% in a week.
Anavex Life Sciences has a Zacks Rank #2 and a solid Momentum Score of A.
Peakstone Realty Trust is an internally managed, publicly registered real estate investment trust that owns and operates single-tenant industrial and office properties. It saw a solid earnings estimate revision of 13 cents for this year over the past 30 days. PKST has a market cap of $613.3 million and declined 14.5% in the initial week of 2024.
Peakstone Realty Trust has a Zacks Rank #1 and a solid Momentum Score of A. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
AC Immune is a biopharmaceutical company that develops, discovers and designs novel, proprietary medicines for the prevention, diagnosis and treatment of neurodegenerative diseases. The stock has shed 14.4% and has a market cap of $361.4 million. AC Immune saw a positive earnings estimate revision of 4 cents for this year over the past seven days.
AC Immune has a Zacks Rank #2 and a solid Momentum Score of A.
Getaround makes sharing cars and trucks simple through its proprietary cloud and in-car Connect technology. The company empowers consumers to shift away from car ownership through instant and convenient access to desirable, affordable, and safe cars from entrepreneurial hosts. With a market cap of $18.8 million, the stock saw a solid earnings estimate revision of 14 cents for this year over the past 30 days.
Getaround lost 14.2% in the first week. It has a Zacks Rank #2 and a solid Momentum Score of B.
Akoya Biosciences offers comprehensive single-cell imaging solutions that allow researchers to phenotype cells with spatial context and visualize how they organize and interact to influence disease progression and treatment response. The stock is down 11.3% and has a market cap of $212.5 million. Akoya Biosciences has seen a solid earnings estimate revision of 9 cents for this year over the past 30 days.
Akoya Biosciences has a Zacks Rank #1 and a solid Momentum Score of A.
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Anavex Life Sciences Corp. (AVXL) : Free Stock Analysis Report
AC Immune (ACIU) : Free Stock Analysis Report
Akoya Biosciences, Inc. (AKYA) : Free Stock Analysis Report
Getaround, Inc. (GETR) : Free Stock Analysis Report
Peakstone Realty Trust (PKST) : Free Stock Analysis Report
