'MacWorld Effect' Pushes Apple Stock to New Highs

It's that time of year again. AsApple shares surged once more past the $200 mark this week, the MacWorld Effect appears to be in full swing.

For those not familiar with the annual occurrence, MWE is based on a well-known stock market adage: Buy on the rumor, sell on the news.

This holds especially true for Apple, arguably the most rumor-inducing tech company in existence. The theory is simple: the more frenzied the chatter about iTunes movie rentals, flash-based laptops or third party native iPhone apps, the more those rumors will attract buyers who in turn push up the stock price. And as anyone who follows the company knows, this is the time of year when rumors tend to reach their apex.

The time to sell is when speculation is tempered by fact, or when the reality of the news becomes a factored part of the share price. In other words, shortly after Steve Jobs announces whatever it is he plans on announcing.

Earlier this year, Owen Linzmayer over at the Peachpit did a nice little analysis of the MacWorld Effect over the past six years and concluded:

If you bought shares of Apple stock one month prior to each Macworld Expo since 2000, and then sold those shares at the closing price on the date of the keynote, you would have had only two losing trades and averaged a three percent monthly gain. That may not seem like a lot, but it works out to an annualized gain of 43 percent. There's not a single broker at the New York Stock Exchange who wouldn't sell his grandmother for that sort of return. So it seems that there's some truth to the old adage after all.

But, wait, there's more. As Linzmayer points out, if you can to wait just a little longer and sell not on the news (the date of the keynote), but a month after it's delivered, the payoff is even larger -- an average seven percent gain, or 51 percent annually.

So if you're in the mood for a little side holiday investing, remember, the formula is simple: buy a month before the keynote, sell a month after the keynote, repeat every January.

Photo: Flickr/netzkobold