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View Full Version : "Sell in May and go away, until November."



spirit
04-30-2012, 09:38 PM
In general, stocks have not faired well in the period May through October. So should we all sell tomorrow, and take a break for 6 months? Many traders will. Or are there individual stocks worth holding during down periods?

In 2011, I was able to assemble a successful portfolio using stocks with low volatility (beta below 1). But they were a scary lot for value and had pretty narrow moats, even though their collective return in 2011 was over 70% (ALXN, MKTX, MMS, PETM, QCOR and ULTA).

Today I used my Fidelity stock screener to look for somewhat more modest stocks:


Strong and stable stocks (common stocks with a market cap > $1B, daily volume > 100K, one year return on equity >20%, debt/capital ratio < 10% and 3Y beta < 1.2).
Excellent recent performance and projected growth (price performance year-to-date > 25%, and projected earnings in the next quarter and year > 10%.
Next year’s PE estimate <25.


This yielded 4 old favorites: AAPL (computers), HIBB (sports equipment), ROST (clothing outlet) and TSCO (farm machinery). Collectively they are up 38% this year, and I hope they will continue growing despite what the rest of the market is doing. By comparison, the most successful large and distinct ETFs year-to-date are IBB (biotechnology, up 21%), QQQ (NASDAQ 100, 20%), XRT (retail, up 19%) and XLY (consumer discretionary, 18%). I plan to pick up IBB and QQQ when and if there is a big market dip.

Who has other ideas?

Ian McColgin
04-30-2012, 09:41 PM
Sell low now and then in the fall buy high? If you want to make a small fortune this could work . . . if you're starting with a large fortune.

SamSam
05-01-2012, 09:34 AM
Selling sometime in March would have worked for me.

spirit
05-01-2012, 10:15 AM
Sell low now and then in the fall buy high? If you want to make a small fortune this could work . . . if you're starting with a large fortune.

I said nothing about selling low and buying high. In fact this would be a wonderful way to make a fortune small.
I also said nothing that would require a large fortune.

My first point was clear: some stocks do well even when most stocks don't advance during May through October. I selected AAPL, HIBB, ROST and TSCO because they are likely to do well even if the whole market doesn't. They are also likely to do well if the market does do well during this period.

My second point is that IF there is a big market dip, then it is smart to buy the dip, and wait for the market to recover. I chose IBB and QQQ as strong ETFs which are likely to recover. This doesn't require a fortune. It requires transferring some funds from money market or bond accounts into ETFs.

Gerarddm
05-01-2012, 11:08 AM
Dividend paying stocks are more stable, typically, and the payout helps mitigate stock price fluctuations.

I dallied with the idea of day trading a couple of years ago but wisely lost my nerve. At the moment I only own SDS and I am STILL waiting for the market to dump. (sigh)

Concordia 33
05-01-2012, 11:27 AM
In general, stocks have not faired well in the period May through October. So should we all sell tomorrow, and take a break for 6 months? Many traders will. Or are there individual stocks worth holding during down periods?

In 2011, I was able to assemble a successful portfolio using stocks with low volatility (beta below 1). But they were a scary lot for value and had pretty narrow moats, even though their collective return in 2011 was over 70% (ALXN, MKTX, MMS, PETM, QCOR and ULTA).

Today I used my Fidelity stock screener to look for somewhat more modest stocks:


Strong and stable stocks (common stocks with a market cap > $1B, daily volume > 100K, one year return on equity >20%, debt/capital ratio < 10% and 3Y beta < 1.2).
Excellent recent performance and projected growth (price performance year-to-date > 25%, and projected earnings in the next quarter and year > 10%.
Next year’s PE estimate <25.


This yielded 4 old favorites: AAPL (computers), HIBB (sports equipment), ROST (clothing outlet) and TSCO (farm machinery). Collectively they are up 38% this year, and I hope they will continue growing despite what the rest of the market is doing. By comparison, the most successful large and distinct ETFs year-to-date are IBB (biotechnology, up 21%), QQQ (NASDAQ 100, 20%), XRT (retail, up 19%) and XLY (consumer discretionary, 18%). I plan to pick up IBB and QQQ when and if there is a big market dip.

Who has other ideas?

I am more of a buy and hold value investorperson. It eliminates all the market timing issues, and I average about 15% per year. About 2/3 of the portfolio goes up and 1/3 goes down - the losers can never lose more than 100% (and most often less than 50%) and the winners have gone up as much as 1000% thus covering the losers with plenty to spare. AAPL is good, but the real money is in WPRT, and CLNE right now. Also, PLOW & UA are good plays

Todd D
05-01-2012, 01:56 PM
I am content to buy and hold only stocks with long proven dividend records and decent payouts. A dip doesn't bother me since I won't sell unless the stock is up from where I bought it. The dividends come every quarter independent of the price of the stock and they go up periodically for all the stocks I own.

spirit
05-01-2012, 06:42 PM
On May 17, 2012 Zacks ran an article about "10 great dividend ETFs" (http://www.zacks.com/stock/news/73951/11-great-dividend-etfs). Collectively they are down 6.93% in the last one year.

By comparison, the well-respected Dodge and Cox income fund (DODIX) is up 1.71% in a year, and the top-notch ETF, IShares Barclays 20+ year treasury bond fund (TLT) has returned a smashing 24.95% in a year (both as of today).

By comparison, a portfolio of WPRT, CLNE, PLOW and UA is up 19.1% in the last one year.

spirit
06-01-2012, 11:06 AM
Score card between May 1 and June 1:

Dow Jones: -8.25%
S&P 500: -8.44%

My 4-stock suggestions: -4.71%

Top ETFs: IBB:-3.85%; QQQ: -8.78%; XRT: -6.36%; XLY: -8.02%

Dodge&Cox income fund: +0.07%
TLT 20+year Treasury ETF: +11.25%