Momentum · month-end rule · Semiconductors
12-1 Momentum on Broadcom
What the play says
Latest reading: 12-1 return 12.9%
AVGO with the play, last two years
Shading shows the play's call from the close that triggered it.
Return from 12 months to 1 month ago
Dashed line at 0.
Growth of $10,000 since 2010
Log scale. After trading costs, with T-bill interest while out.
The record
The play against buying and holding AVGO over exactly the same dates, after costs.
| Play, since 2010 | Hold, since 2010 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +36.2% | +40.7% | +46.0% | +52.1% |
| Total return | +14,239% | +24,187% | +557% | +705% |
| Worst drawdown | −48.3% | −48.3% | −41.1% | −41.1% |
| Volatility | 36.9% | 38.5% | 43.7% | 44.5% |
| Sharpe ratio | 0.98 | 1.04 | 1.00 | 1.08 |
| Time invested | 90% | 100% | ||
| Switches per year | 1.1 | 0 |
Every call, graded
Right on 10 of 18 closed calls (56%). In calls averaged +62.8%; out calls saw AVGO move +7.1% on average.
| Called | Call | Price | Until | AVGO moved | Result |
|---|---|---|---|---|---|
| Apr 28, 2023 | IN | $60.00 | now | +495.5% | open |
| Mar 31, 2023 | OUT | $61.44 | Apr 28, 2023 | −2.3% | ✓ right |
| Feb 28, 2023 | IN | $56.51 | Mar 31, 2023 | +8.7% | ✓ right |
| Oct 31, 2022 | OUT | $44.33 | Feb 28, 2023 | +27.5% | ✕ wrong |
| May 29, 2020 | IN | $25.34 | Oct 31, 2022 | +74.9% | ✓ right |
| Mar 31, 2020 | OUT | $20.63 | May 29, 2020 | +22.8% | ✕ wrong |
| Jan 31, 2019 | IN | $22.10 | Mar 31, 2020 | −6.7% | ✕ wrong |
| Aug 31, 2018 | OUT | $17.73 | Jan 31, 2019 | +24.7% | ✕ wrong |
| Jun 29, 2018 | IN | $19.64 | Aug 31, 2018 | −9.7% | ✕ wrong |
| May 31, 2018 | OUT | $20.13 | Jun 29, 2018 | −2.5% | ✓ right |
| Jun 30, 2016 | IN | $11.89 | May 31, 2018 | +69.3% | ✓ right |
| May 31, 2016 | OUT | $11.77 | Jun 30, 2016 | +1.0% | ✕ wrong |
An in call is right when the price rose before the next call; an out call is right when it fell. The latest 12 of 19 calls shown.
How the play works
- In at month-end when the return from 12 months ago to 1 month ago is above zero.
- Out when it is zero or below.
Jegadeesh and Titman ranked thousands of stocks and bought the winners. Testing one stock against zero is time-series momentum, a related idea.
The skip-a-month form came later; their 1993 paper skipped at most a week.
The case against
Valeriy Zakamulin tested moving-average timing on up to 155 years of U.S. stock data and found no statistically significant edge in the second half of that record. The rules earned their keep in a few severe bear markets and lagged buy and hold for long stretches in between.