Business really heats up for some companies during the summer months. But don’t assume the same is the case for their shares.
There are five companies in the Russell 1000 index, including theme park operator Six Flags Entertainment (SIX), concert promoter Live Nation (LYV) and toymaker Hasbro (HAS), that got a third of their annual revenue in the third calendar quarter, according to a USA TODAY analysis of data from S&P Capital IQ. Financial companies were excluded.
Seeing such a concentration of business in the third quarter, which spans most of the summer months of July through September, is unusual. The third quarter for most companies just just another equal piece of the revenue pie. Companies in the Russell 100, on average, get 25.7% of their revenue in the third quarter.
|Company||Symbol||% from Q3|
Amusement park giant Six Flags counts on the third quarter more than any other company. The company hauled in $541.8 million of revenue during the quarter, which is 46% of its total revenue over the past twelve months. Similarly, SeaWorld, another massive themepark company, counted on the third quarter for 36% of its revenue over the past 12 months.
It’s easy to see how the themepark operators could count on the summer months. But the big toymakers do too, with Hasbro and Mattel (MAT) grabbing more than a third of their revenue the past 12 months during the summer months, too. Looks like parents spend big on SuperSoakers and Hot Wheels to keep their kids occupied during the summer.
But here’s the part that’s not as intuitive for many investors – who think they can time this seasonal bump in business and score some summer spending money for themselves. Buying ahead of the big quarter for these companies isn’t necessarily a winning strategy. In fact, it’s been anything the past two years.
Investors who bought shares of Six Flags stock on June 1 and sold at the end of September the past two years suffered loses. Shares declined 15% between June 1, 2014 and September 30, 2014 and 9.4% between the same dates in 2013.
And it’s just not Six Flags. A custom equal-weight index of all five summer-dependent stocks sank an average of 13.9% during June 1, 2014 and September 30, 2014. That lags the Standard & Poor’s 500’s 2.5% gain during the same period. Part of last summer’s poor performance was due to the 37% decline by SeaWorld as the company continued to see business shrink amid allegations of mistreatment of animals (which the company denies). Compare how a custom equal-weighted index of these summer-dependent stocks did compared with the S&P 500 last year.
But you can’t blame this entirely on SeaWorld. These summer-dependent stocks didn’t do much better in 2013 – gaining an average of 2% – while the S&P 500 added 3.1%.
So go ahead and enjoy your summer concerts, rides and toys. Just don’t make the mistake of thinking you can necessarily profit from them – just because it’s the summer.