Why Does This Stock Predictably Go Up In April?

Over the past few days we’ve covered stocks that have strong histories of rising at this time of year, and apparently our readers really want to hear more about similar ideas, so here’s another nugget for you.

This time we turn our attention to the healthcare space where a well-known company, Quest Diagnostics, has a remarkable track record over the next 11 weeks of rising over 77% of the time during the past 27 years.

At first glance, it’s hard to understand why the company has a track record of rising by about 13%, on average, at this time of year but we think we’ve cracked the code.

Key Points

• The seasonal uptick for Quest Diagnostics begins in April, driven by an increase in healthcare utilization as many individuals have met their insurance deductibles by this time, leading to a higher demand for diagnostic testing and preventive screenings.
• It also aligns with the peak of allergy season in the U.S., notably April and May, when demand for allergy tests and related diagnostic services spikes due to high levels of pollen and allergens, benefiting Quest Diagnostics.
• In addition, the start of corporate wellness programs in the second quarter boosts demand for health screenings and diagnostic tests.

Why Quest Rises At This Time of Year

One of the most compelling reasons for this seasonal uptick is linked to healthcare spending habits. Typically, during the early months of the year, many individuals are either just meeting their insurance deductibles or are planning their healthcare expenditures.

By the time April arrives, a significant portion of the population has met their deductibles, leading to an increase in healthcare utilization, including diagnostic testing and preventive screenings.

Quest Diagnostics, being a premier provider of diagnostic services, stands to benefit directly from this surge in demand.

The timing of this trend also coincides with the peak of allergy season in many parts of the United States. April and May are notorious for high levels of pollen and allergens, driving up the demand for allergy tests and related diagnostic services.

Quest Diagnostics, with its extensive array of allergy testing services, is well-positioned to capture this seasonal demand, translating into stronger financial performance during these months.

Less Obvious Factors Also Drive Demand

The start of the second quarter often marks the rollout of corporate wellness programs, which frequently include health screenings and diagnostic tests as part of their initiatives.

Companies tend to encourage participation in these programs in the spring, aiming to improve employee health while managing healthcare costs.

Quest Diagnostics, through its Employer Population Health programs, is a key player in this space, providing services that are in higher demand during this season.

In addition, the historically strong performance in the April to June quarter also aligns with the timing of first-quarter financial reports and the issuance of updated guidance by many companies.

Quest Diagnostics typically reports its first-quarter earnings in April, which can influence investor sentiment and stock performance. As investors anticipate positive results and see seasonal spikes they tend to hop on board the anticipated trend early.