After witnessing events like the phenomenally sharp decline that the stock market recently saw in reaction to the coronavirus epidemic, it is easy to give in to the “doom-and-gloom” sentiment that is not only evident in the markets, but also echoed the media. Many investors may thus come to believe that there are no good investment opportunities to be found, anywhere. However, nothing can be further from the truth: even during severe downturns, you can find truly promising opportunities, if you know where and, more importantly, how to look.

Stocks never all go up or down at the same time. Many individual stocks can enjoy periods of seasonal strength and they can stay true to their seasonal patterns even during a wider market downturn. Being able to identify these phases in time can therefore provide an especially strong edge to investors.

To illustrate this point more clearly, I’d like to draw your attention to one such stock: Chevron, the American multinational oil and gas giant, that exhibits a few particularly interesting seasonal features.

A great time to hold Chevron: March to June

Unlike an ordinary price chart, that simply shows the stock price over a specific period, a seasonal chart depicts the average price pattern of a specific stock in the course of a calendar year, calculated over a number of years. The horizontal axis depicts the time of the year, while on the vertical one you can see the level of the seasonal pattern (indexed to 100). With that in mind, let’s examine the seasonal chart of Chevron below, showing its seasonal patterns over the last 20 years.

Chevron, seasonal pattern over the past 20 years

Chevron typically delivers strong gains from early March to mid-June.
Source: Seasonax (click here to analyse the pattern)

As you can see, I have highlighted a strong seasonal phase, from March 10 to June 18. On average, during this period, Chevron has delivered returns over 6.39%, which corresponds to a very decent annualized gain of 25.68%.

What’s even more important, is that these positive returns during this phase are very consistent too, thereby making the pattern more reliable. In fact, in the last 20 years, Chevron has delivered solid gains, between March 10 and June 18, in 16 of them.

Chevron, average return in percentage points from March 10 to June 18, in every year since 2000

Chevron posted losses on only 4 occasions in 20 years.
Source: Seasonax (click here to analyse the pattern)

Chevron’s seasonal gains remain consistent even during market downturns

Here’s where it gets even more interesting. Take a closer look at the chart above and this time, notice the specific years where the stock delivered its seasonal gains: amongst them you’ll find 2000, 2001, and 2008, all of them being particularly challenging years for the stock markets at large. And yet, Chevron still delivered positive returns and stuck to its seasonal pattern for the period between March 10 and June 18.

Find unique opportunities with seasonal patterns

As you can see from the example of Chevron, individual stocks often enjoy phases of seasonal strength, regardless of what is happening to the rest of the market. This is why you shouldn’t be discouraged or scared away by stock market downturns and sharp corrections. There are still many great opportunities to be found even during challenging times.

Dimitri Speck
Founder and head analyst of Seasonax