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Thursday, 05 May 2011 - 20:00
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Charts
Sell in May and Go Away?
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There is an old adage in the investment industry that goes along the lines of “Sell in May and Go Away”. The theory goes that investors are better off if they sell their shares at the beginning of May; put the money in the bank (cash), and then only look to buy again at the end of October. In this way they would be in the market for 6 months and in cash for 6 months of each year.
With the ALSI down over 4% on the first three trading days of May, I got thinking about this saying.
Is there any truth in the tale?
Before going any further, any analysis not based on fundamental logic/reasoning can’t be taken seriously. The below analysis should merely be seen as an observation, not some kind of investment strategy. As Nassim Taleb (author of Fooled by Randomness and The Black Swan) says, humans have a way of creating patterns in places where none exist.
I took a look at return data of the local All Share Index over the past 41 years (starting in 1970). When comparing the returns of the market from 1 May – 31 October (bad months) to the rest of the year we can see that there is a marked difference between the two.
We can further see from the chart above that the ALSI still manages to beat cash in the bad months, and investors would therefore still be better off keeping their money in the market (albeit with significantly more volatility than cash). Global markets seem to follow the same trend of a better November to April period (23 years of data).
The average return is a full 6.5% higher in the November – April (good months) when compared to the bad months. Taking a look at the outlier years, we see that both periods still both experienced high maximum and low minimum returns. This adage therefore doesn’t work all of the time. In fact, the bad months had a ‘better than average return’ in 18 of the 41 years (44% of the time)
When breaking down the returns into the individual months we can see that these 6 monthly returns are particularly skewed by a few outlier months, namely December (historically a good month) and June (historically a bad month).
In fact, if we shifted the bad months to 1 June – 30 November there would be an even greater difference in the return profiles.
It is clear that over the past 41 years investors generally received a better return in the period 1 November – 30 April than 1 May – 31 October. What is less clear is whether this will be the case going forward.
Remember that it is fairly straight forward (when armed with some Excel skills) to mine and manipulate data to show trends, it is another matter altogether to make sensible conclusions from these trends.
If successful investing was as simple as investing in the ALSI for the 9 months when markets have historically given you cash beating returns and sitting in cash for the other three months, everyone would be able to quit their day job. One would need to look deeper at the reasons for the disparity in the returns in order to make any sensible conclusion.
At Seed we continue to look at the fundamental value of the various asset classes before making decisions to buy or sell the assets.
Take care,
Mike Browne
info@seedinvestments.co.za
www.seedinvestments.co.za
www.facebook.com/SeedInvestmentConsultants
021 9144 966
Top News
![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnewsimages%252F2011-05-05T134711Z_01_AJOE74412AP00_RTROPTP_3_OZABS-SAFRICA-RAND-20110505.JPG "A BANK TELLER LOOKS AT 50 AND 100 SOUTH AFRICAN RAND NOTES.") South African assets took a beating on Thursday as a combination of lower metal prices, worries about global growth and a rising dollar hurt sentiment. Full story ![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnewsimages%252F2011-05-05T104924Z_01_AJOE7440U2E00_RTROPTP_3_OZABS-HARMONY-20110505.JPG "A mine worker is seen underground in South Deep mine outside Johannesburg") South African group Harmony Gold fell short of market expectations with a 32 percent rise in quarterly profit after a slow restart following its annual Christmas shutdown led to a drop in production. Full story |
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strength of the global economic recovery. Full story  A car bomber killed more than 20 people and wounded 80 Thursday at a police building in the mainly Shi'ite city of Hilla, an official said, as Iraq braced for revenge attacks after U.S. commandos killed Osama bin Laden. Full story  In 2003 or 2004, Pakistani intelligence agents trailed a suspected militant courier to a house in the picturesque hill town of Abbottabad in northern Pakistan. Full story |
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Markets |
The Dow and S&P 500 dipped on
Thursday after a weak labor market report, but losses were
capped as a steep drop in. . . Full story |
European shares fell on Thursday,
with disappointing results weighing on banking stocks, while
heavyweight mining firms tracked a pullback in commodity prices
on growing. . . Full story |
Silver plunged 7 percent on
Thursday, heading for its biggest weekly loss since 1983 and
dragging gold 2 percent lower, as panic selling. . . Full story |
Sliding commodity prices thumped
energy stocks and miners while Lloyds Banking Group led
financials down, pulling Britain's top share index lower on
Thursday, with. . . Full story | |||
Disappointing results from
European banks dragged stocks lower on Thursday while investors
waited for the European Central Bank to give hints on the. . . Full story |
European shares fell on Thursday,
led by banks after weak earnings news from companies including
Lloyds, and with investors cautious ahead of the. . . Full story |
Hong Kong shares ended at a
five-week low as persistent weakness in energy counters offset
gains by some financials, while index futures signalled. . . Full story |
Australian shares rose 0.3
percent on Thursday, boosted by a rally in National Australia
Bank after its record earnings beat forecasts, and more
broadly. . . Full story | ||||
SA Business |
South Africa's business confidence index fell to 86.9 points in April from a 30-month high of 88.3 in March, the South African Chamber of Commerce and Industry (SACCI) said on Thursday.. . . Full story |
South Africa's rand firmed against the dollar in early Thursday trade as commodities looked to recover but retreated further away from a tough resistance area tested earlier in the week.. . . Full story | |||||
South Africa produced 1.43 million tonnes of wheat during the 2010 season compared with 1.958 million tonnes in 2009, the country's. . . Full story | Government support for renewable
energy must end gradually and in tandem with cuts in fossil fuel
subsidies, say investors and lobbyists who complain. . . Full story | The global supply of platinum is expected to rise slightly this year, with upcoming wage talks in top producer South Africa. . . Full story | Aquarius Platinum said it would boost its resource base by nearly a quarter as it announced a mineral rights acquisition that. . . Full story |
Company News |
The group has had a strong performance for the first six months to 31 March 2011, with Headline earnings per share. . . Full story |
Further to the trading statement released on SENS on 14 March 2011, shareholders are advised that the group's basic and diluted. . . Full story |
Vukile linked unitholders are referred to the announcement published on SENS on 11 April 2011 regarding the acquisition of Giyani Plaza. . . Full story |
Holders of securities in Trencor are advised that Textainer Group Holdings Ltd (NYSE: TGH), in which Trencor has a 60.9% (31. . . Full story | |||
Shareholders are referred to the circular to Simmers shareholders dated 2 March 2011 ("the circular"), the circular to Village shareholders dated. . . Full story |
The Lewis Group advises that, for the year ended 31 March 2011, its earnings per share and headline earnings per share. . . Full story |
Shareholders were advised that at the annual general meeting held on 5 May 2011, all resolutions were passed with the requisite. . . Full story |
Shareholders are referred to various announcements released on SENS of the JSE Ltd ("JSE") and the circular to shareholders dated 9. . . Full story | ||||
Company Results | Revenue increased marginally to R22.8 billion (R22.3 billion) and earnings before interest, tax, depreciation and amortisation (EBITDA) rose to R2.1 billion. . . Full story | Rent received amounted EUR1.7 million (February 2010: EUR 291 000) for the company's full-year results as at 28 February 2011. Results. . . Full story | Total revenue for the interim period rose to R1.678 billion (2010: R1.481 billion). Net operating income increased to R1.222 billion (2010:. . . Full story | Revenue for the period increased to R85.6 million (2010: R79.9 million) . Gross profit rose to R47 million (2010: R43.9. . . Full story |
World Markets (Spot Prices)
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The JSE Today
Trading Statistics| Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
|---|---|---|---|---|---|---|---|---|
| 05/05/2011 | 101 | 213 | 87 | 401 | 295,115,753 | R12,787,598,135 | 94510 | 2574216 |
| 04/05/2011 | 95 | 240 | 75 | 410 | 268,867,587 | R13,667,771,530 | 100927 | 2202187 |
| 03/05/2011 | 107 | 242 | 72 | 421 | 244,019,025 | R11,158,093,078 | 116065 | 2159242 |
| 29/04/2011 | 199 | 94 | 83 | 376 | 149,762,539 | R6,806,835,882 | 58871 | 1183771 |
| 28/04/2011 | 206 | 129 | 70 | 405 | 233,471,083 | R10,955,131,903 | 108893 | 2096163 |
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Index Summary
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Stock Exchange News Service
| Date | Time | Headline |
| 05/05/2011 | 17:03 | ABCD01 - ABSA Bank Limited - Notice of expiry and maturity |
| 05/05/2011 | 17:00 | BAW/BAWP - Barloworld Limited - Trading Statement |
| 05/05/2011 | 16:58 | Jasco - Update to changes to the board previously announced |
| 05/05/2011 | 16:58 | Cadiz Holdings Limited - Trading Statement |
| 05/05/2011 | 16:56 | Vukile Property Fund - Further announcement regarding the acquisition of |
| 05/05/2011 | 16:53 | 1time holdings Limited - Dealings in securities by directors |
| 05/05/2011 | 16:52 | Finbond Group Limited - Audited results for the 12 months ended 28 |
| 05/05/2011 | 16:45 | British American Tobacco p.l.c - Notification of transactions of |
| 05/05/2011 | 16:40 | Intertrading Limited - Revised Trading Statement |
| 05/05/2011 | 16:19 | Trencor Limited - First quarter update |
| 05/05/2011 | 16:18 | Sea Kay Holdings Limited - Sale of Silver Falcon (Pty) Limited, Seriso 474 |
| 05/05/2011 | 16:07 | SIM/VIL - Simmer & Jack Mines Limited/Village Main Reef Limited - Update on |
| 05/05/2011 | 15:37 | Consolidated Infrastructure - Update in respect of the consolidation of |
| 05/05/2011 | 15:30 | Lewis Group Limited - Trading Statement |
| 05/05/2011 | 15:00 | Wesizwe - Results of the Annual General Meeting |
| 05/05/2011 | 14:44 | Trading of Exxaro ordinary shares |
| 05/05/2011 | 14:10 | CCO - Capital & Counties Properties Plc - Results of Placing |
| 05/05/2011 | 13:36 | SCIB/SBR003 - The Standard Bank Of South Africa Limited - Interest Rate |
| 05/05/2011 | 12:18 | EXT - Extract Resources Limited - Update regarding possible offer for Kalahari |
| 05/05/2011 | 12:00 | MND/MNP - Mondi Limited and Mondi plc - Annual general meetings |
| 05/05/2011 | 12:00 | CLRP - Clover Industries Limited - Dealing in securities by director |
| 05/05/2011 | 11:46 | CUL/CULP - Cullinan Holdings Limited - Unreviewed condensed consolidated |
| 05/05/2011 | 11:00 | SCIB - Standard bank of South African Limited - Notice of rollover of |
| 05/05/2011 | 10:43 | Ingenuity Property Investments Limited - Announcement regarding the |
| 05/05/2011 | 10:30 | AECI - No Change Statement and Notice of Annual General Meeting |
| 05/05/2011 | 10:22 | UCS - UCS Group Limited - Finalisation announcement regarding the dates and |
| 05/05/2011 | 10:22 | Business Connexion Group Limited - Fulfilment of conditions precedent |
| 05/05/2011 | 09:51 | SCIB - The Standard Bank of South Africa Limited - Issue of share instalments |
| 05/05/2011 | 09:50 | RES - Resource Generation Limited - Change of Director`s Interest Notice |
| 05/05/2011 | 09:49 | Resource Generation Limited - Notice of initial substantial holder |
| 05/05/2011 | 09:48 | Resgen - Change of Director`s Interest Notice |
| 05/05/2011 | 09:30 | African Oxygen Limited - Quarterly Results of Linde AG |
| 05/05/2011 | 08:33 | BRC DiamondCore - BRC Diamondcore announces Financing |
| 05/05/2011 | 08:32 | Wesizwe Platinum Limited - Total financing solution for the |
| 05/05/2011 | 08:07 | Lonrho - Lonrho reports 37% Growth in revenue in Q2 and Profit |
| 05/05/2011 | 08:01 | CCO - Capital & Counties Properties PLC - Placing to fund acquisition |
| 05/05/2011 | 08:01 | Harmony - Press release: Harmony continues to drive its growth strategy |
| 05/05/2011 | 08:00 | CCO - Capital & Counties Properties Plc - Interim Management Statement for the |
| 05/05/2011 | 08:00 | MND/MNP - Mondi - Interim Management Statement |
| 05/05/2011 | 08:00 | Harmony - Results for the third quarter and nine months ended 31 March |
| 05/05/2011 | 08:00 | African Eagle Resources plc - Director Appointment |
| 05/05/2011 | 08:00 | Metair Investments Limited - Announcement to shareholders |
| 05/05/2011 | 07:21 | BHP Billiton plc - Transaction in shares |
| 05/05/2011 | 07:05 | WWR/ GDO - White Water Resources/ Gold One - Finalisation data relating to the |
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