Yet another Sell in May and Go Away (yasimaga) post

A few sell in may articles…

Have you read any “sell in May and Go Away” articles? These articles suggest that returns from May to October are terrible. So bad, in fact, that you’d be better off just avoiding the whole mess altogether. I’ve included some of the better-written posts for your reading pleasure

Forbes: Sell in May and Go away?

Adam Sarhan opines that a bad jobs report and lackluster earnings will cause problems. But his title is clearly referring to the seasonal pattern.

Wikipedia: Sell_in_May

It covers research in many countries and is enough to convince me to dig further.

TheStreet: the-real-reason-we-say-sell-in-may-and-go-away

Ken Roberts describes a difference in sectors, with retail, media, utilities, and defensive stocks enjoying the summer more than others.

CFA Institute: Sell in May and Go Away?

Joachim Klement, CFA, argues that it works. Of course, he does has an ulterior motive, he wants a summer vacation

All this reading made me very curious, and so I wanted to know…

Does sell in May actually work?

The baseline

First, I create a screener that rebalances on the first of May, and the first of November. It uses the typical universe, where all stocks below $500,000 trading volume are excluded. We do this as a baseline, so we don’t get tricked by rebalancing effects.

Figure Rebalance May 1st and November 1st

Seems pretty much like a baseline to me. Let us knock out May through October. Notice the flat lines that run from May until November.

Figure Sell in May and go away

There’s something deeply pedantic in my desire to benchmark the other side of this coin. Nevertheless, here it is.

Figure Buy in May and stick around

Lots of time in the market gives you very little reward…

Is May itself special?

What if you just held stocks for June through October. Will you still have poor performance? This might happen to you if you read all the Sell in May articles people publish, cogitate, and realize much of May has left.

Figure Buy in June and stick around

Yup — still works. That’s one resilient strategy. It works even better than the original! It turns out, though, that you should buy in November. Waiting until December doesn’t work as well.

May in various sectors

Does this effect vary by sectors? Does it work in reverse for some sectors? If so, that would be handy, since we’d buy summer stocks in summer, and winter stocks otherwise.

First up, utilities (the first one is the summer performance, the other one is the winter performance):

Figure summer utilities

Figure winter utilities

So with an average utility stocks, you are better off holding the stock during summer than selling it. Still, most of the gains occur during the winter months.

Other sectors

Hmm… So if you should hold on to your utility stocks, does that mean there are sectors where the sell-in-may effect is even worse? The answer is yes! Otherwise the Sell in May effect would be known as the Hold and Underperform Mildly in May effect. First up, we highlight tech stocks (summer first, winter second).

Figure summer technology

Figure winter technology

With technology stocks, holding all such stocks in the summer months would have lost you 50% of your money! Though, there are sectors that are even worse during the summer…

Figure summer transportation

Figure winter transportation

When holding transportation stocks only in the summer, you lost a 64% of your initial value. Eeeks! In fact, when we ran our simulation, it was a bad idea to hold stocks in the following sectors: Technology, Transportation, Basic Materials, Energy, Industrials, or Consumer Cyclicals sectors. All of these sectors distinguished themselves by actually losing money during the summer. It almost seems like there’s a way to measure the seasonality of an industry or group. If so, we can sort our portfolios to avoid the seasonal industries, market cap segments, etc when the season is wrong.

Enjoy your summer,


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  1. Hmm…Do you conclude that on average overall market gains are accomplished in Jan-May, and the rest of year is a wash?

    1. Well — actually Oct-May, but yeah, so far that’s what I’m concluding. Not sure I like that conclusion, hence me pounding on it more.

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