17 reasons not to sell in May
These stocks are in sectors whose historical returns have been solid anytime of year.
By Mark Hulbert, MarketWatch
Not all stock market sectors exhibit the "sell in May and go away" seasonal pattern that is kicking in tomorrow.
The ones whose average historical returns have been just as good between May Day and Halloween, as in the other six months of the calendar, are food and agriculture, leisure, multimedia, retailing and utilities.
Those of you who don’t know the “sell in May and go away” strategy may recognize it by its other name: The Halloween Indicator. Regardless, the pattern refers to the tendency for the stock market to post its best returns between Halloween and May Day (the "winter" months) and to record mediocre performance, at best, between May Day and Halloween (the "summer" months.)
Unlike most other seasonal patterns that capture Wall Street's attention, this one has a very strong statistical foundation. It's been discovered in the stock markets of 36 of 37 countries that were studied, and as far back as 1694 in the case of the United Kingdom.
The results were based on the performance of the entire stock market, however, and some sectors historically have not adhered to the same seasonal pattern. That's according to an academic study titled "The Halloween Effect in U.S. Sectors," written by Ben Jacobsen, a finance professor at Massey University in New Zealand, and Nuttawat Visaltanachoti, a senior lecturer in finance at that institution.
The industry groupings that stood out the most in their study were the five mentioned above.
One option would be to invest in ETFs benchmarked to those five. But another would be to focus on stocks within the sectors that are particularly compelling.
With that in mind, I turned to the Hulbert Financial Digest database of investment advisers' performance. The list below contains stocks recommended by at least three advisers who have beaten the stock market over the past 15 years (a period long enough to largely eliminate the role of luck).
Note that there are no leisure stocks in the list.
Food & Agriculture
- Coca Cola (KO)
- Pepsi (PEP)
- Tyson Foods (TSN)
- Comcast (CMCSA)
- DirecTV (DTV)
- Disney (DIS)
- The Gap (GPS)
- Home Depot (HD)
- Kroger (KR)
- Target (TGT)
- Wal-Mart (WMT)
- Aqua America (WTR)
- Atmos Energy (ATO)
- Avista (AVA)
- Entergy (ETR)
- Southern Co. (SO)
- Xcel Energy (XEL)
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