“Forget the presents this holiday season. You might be better off buying stock,” wrties Jeff Opdyke in today’s Wall Street Journal.

“Many investors know about the so-called January effect — the tendency of certain stocks to rise in January after money managers tweak their holdings for tax purposes. But the January effect typically applies to smaller stocks. And it’s become so well-known that the effect often begins playing out as early as October, when investors start buying companies they think will rebound in January.”

“This year, however, there may be a far more broad-reaching and powerful January effect — one that could make what’s left of this month a welcome buying opportunity.”

“Here’s why: December traditionally has been the strongest, most consistently bullish month of the year. But a statistical wrinkle could mean this December is uncharacteristically weak. In more than half the 21 instances since 1897 when the Dow Jones Industrial Average fell by 10% or more in the first 11 months of the year — it was down 11.2% this year — December was a weak month, according to new research by RiskMetrics Group, a market-research firm.”

“The good news: When this pattern emerges, the broad market smartly bounces back in January, climbing an average of 2.5%.”

“How do you take advantage of this trend? Buy stocks in December. Make that late December. If the month runs true to form, the best time to buy will be when the rest of the world is sipping eggnog — Dec. 23, Dec. 24 and Dec. 26, calculates RiskMetrics. Those days have traditionally been the poorest performers in the off-years.”

“Certainly, shopping on Wall Street these days is probably the furthest from many people’s thoughts. The stock market is set to record its first three-year losing streak in more than 60 years. Based on the market-value decline of the Wilshire 5000 Index, a proxy for the total market, investors so far this year have lost roughly $2.6 trillion. If those numbers hold, it will be the worst shellacking investors have ever suffered in dollar terms, eclipsing the previous record of $1.9 trillion in losses in 2000, when the bull market first cracked.”

“Of course, you have to be a contrarian to wade into a falling market. That ‘can be gut wrenching,’ says David Dreman, chairman of Dreman Value Management, a contrarian investment firm. Dreman Value has snapped up shares of Fannie Mae and Freddie Mac, two quasi-governmental mortgage-finance companies that have been criticized harshly on a variety of issues. ‘None of that criticism is really hitting pay dirt,’ he says.”

“Mr. Dreman also likes Electronic Data Systems, battered by tepid earnings and the downturn in technology spending. ‘When information-technology spending comes back around, EDS will be one of the first beneficiaries,’ he says.”