Winter is one of the two best seasons for Booking.com. This is also true for the company's stock. The winter strategy will show you how holding the stock for just 25 days in January and February could yield results similar to holding the index for the entire year.
Inspirations
Booking is a global leader in hotel and other travel service bookings, which needs no introduction. This strategy explores a winter pattern in the company's stocks, which has provided an average return of around 9% over the past 20 years in just a few weeks of holding the stocks, with 80% of transactions being profitable.
Is it worth your attention? Evaluate it from this review.
Key components
Exploration of the winter pattern in the company's stocks
The strategy is based on specific dates. We completely ignore trends, news, the company's valuation, and the overall market situation.
Entry rules
Purchase is made in the last few days of January.
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Exit rules
Sales take place on February 22nd or the next day if it is a holiday.
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Backtest 1, Fixed $ Money Management
In this variant, we are consistently investing the same amount of $100k.
We have been testing for the last 20 years period.
Capital chart for this test:
Test results:
Example of a transaction on a chart:
The average annual result was over 9%, which, when using capital for only 6.8% of the year, gives an annualized return of 135%! Importantly, the strategy had a high win rate of 80%, and the average win was nearly 4 times greater than the average loss.
Backtest 2, % Money Management
In this backtest, we invest in a strategy that constantly allocates 100% of the current capital (with an initial capital of $100k). This means that as the capital increases or decreases, the value of the position changes proportionally. The rest of the parameters remain unchanged.
The capital chart for this test looks as follows:
Basic statistics resulting from the test:
Additional Information
SL & TP
The strategy does not use typical stop loss and take profit levels, although they can potentially be implemented. According to our tests, for most ETF and stock strategies, these settings worsen the results (see why). The diversification within the strategy portfolio serves as protection against the strong impact of a potential price change of a single stock on the entire portfolio.
Market Regime
The strategy has been tested in all major market regimes and has performed well in different periods despite its simplicity.
Trading Costs
The backtests include trading costs and slippage typical for the strategy, which were observed in real tests with the Alpaca broker (detailed study). With a diversified portfolio of stocks and strategies, transaction costs can significantly affect your profit or loss, so take the time to thoroughly test and choose a broker.
Robustness
The BKNG strategy has performed very well over the past 20 years. However, if we were to test it earlier in 2000-2002, it would have been a highly losing period. I deliberately excluded this period from the tests. It was right after the IPO (1999) and during the DOT COM Crash, when the company, like many others .COM companies lost 99% of their value at one point. I consider this period unreliable because the star of Booking only started to shine in the following years. However, the strategy receives a minus of robustness for having fewer years in the backtest.
The strategy was not generated automatically or optimized automatically to match the optimal equity to the historical data (read why).
The main concern with seasonality strategies is the low number of trades. We cannot completely compare it to the number of trades obtained in backtests of stockpicker-type strategies. Seasonal patterns, by their nature, will never have a large number of trades.
Recommended Instruments
The main instrument is BKNG.
Pattern Day Trader
The strategy is suitable for use on smaller accounts as well. The holding period is more than 17 business days, which of course does not meet the PDT requirements.
Correlation with Other Strategies
The strategy aligns with trends related to the winter period. Therefore, it may be correlated with strategies that trade during this period. It is worth including it in a broader portfolio of strategies. Go to the correlation page.
Summary & Strengths and weaknesses of the strategy
The BKNG Winter Travel strategy has received the highest ratings in the past 20 years for its win rate (80%), nearly 4 times larger average win than a loss, and very low capital commitment - only 7%.
I lower its ratings due to the need to exclude the first years after the IPO from the backtest (as described above) and the relatively short pattern duration (only 4 weeks), which may require necessary modifications in the longer term. However, it still receives a well-deserved high overall rating, and I include Booking in my short-term winter trades.
The strategy is easy to use manually but in our opinion needs to be traded in a portfolio. If you value your time, we suggest entrusting this work to simple and effective algorithms, so you don't have to worry about deadlines, especially since you can use capital precisely for only part of the year and use multiple systems simultaneously.
Download is free - login required
What you get in the package for this strategy for FREE:
An SQX file ready to be used on the Algocloud and StrategyQuant platforms.
Pseudocode that describes all the rules in an easy-to-understand way.
Disclaimer
The results obtained from historical data do not guarantee future outcomes. The effectiveness of a strategy can change over time. Backtesting is a tool that allows for the analysis and evaluation of an investment strategy based on historical data. Various factors, such as market changes or economic conditions, can influence the effectiveness of a strategy over time.
Investing always involves risk. This material is not investment advice. We share our experience and algorithms for educational purposes. We make efforts to ensure that our algorithms are error-free, but neither we nor the tools we use guarantee the absence of technical issues. Any decisions to use a particular strategy are made at your own risk and should be preceded by careful understanding and verification. You should always carefully consider your investment goals and risk tolerance before making investment decisions.
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