Three Stocks You Shouldn’t Sell in May

In theory, today is the last day you should buy stocks for a while.
Tomorrow is the first day of May, kicking off the worst six months on the investment calendar. You should sell all your stocks now and go into hibernation until November – or “Sell in May and Go Away,” as the saying is called.
That’s exaggerating it just a tad. But “Sell In May” isn’t just some half-baked superstition. It’s a real phenomenon – and the numbers support it.
Since 1950, the Dow Jones Industrial Average has gained 7.5% on average from November through April, but has been virtually flat the other six months – starting in May. The theory has held up especially well recently.
“Sell In May” has proven true four of the last five years. Since 2007, stocks have fallen by an average of 3.8% from May through October. They’ve risen 4.1%, on average, from November through April.
Only once – 2009, as the recession clouds were clearing – in the last seven years has the May-October period produced higher returns than April-November.
Sell in May is no joke. But it shouldn’t prompt you to close out your brokerage account for six months. If you look hard enough, there are still plenty of good investment opportunities between now and Halloween.
Here are three stocks that are living proof of that – stocks that have bucked the Sell-in-May trend by rising each of the past four years:
Google (NASDAQ: GOOG)
These are heady times for Google. Shares of the search-engine giant are up close to 11% year-to-date, flourishing while rival Apple’s (NASDAQ: AAPL) stock has been in a tailspin. There are reasons to believe Google’s run isn’t over yet. In fact, recent history suggests it may just be getting started.
Lately, some of Google’s best gains have come during the “Sell In May” period. Since 2008, the stock has returned an average of 19% from May-October. Considering the stock has advanced a total of 97% in the last four years, it’s clear that the alleged “worst six months” are when Google has done most of its damage.
Like the “Sell In May” theory itself, there’s no reasonable explanation for Google’s strength during the market’s traditional “off” months. Perhaps summer break gives the kids a lot more free time to Google things or to buy new Android phones. The spring and summer quarters, however, were Google’s least profitable periods last year – which seems to discount that theory.
Maybe it’s best to chalk it up to Google being a strong company that continues to grow through all seasons.
Duke Energy (NYSE: DUK)
Utilities are an evergreen sector that tends to produce steady – if unspectacular – gains regardless of market conditions or seasons. And with a $53 billion market cap, Duke Energy is the largest public utility company in America.
True to its sector, Duke’s May-through-October performance in recent years has been reliably solid, returning an average of 7.5%. Its returns during that period have never risen above 12%, but the stock has been in the black each of the last four “Sell In May” periods.
One other perk: like most utilities stocks, Duke Energy is also a dividend stock, yielding a generous 4.1% with a quarterly payout of $0.765 per share. That extra income on top of the reliable returns makes Duke Energy an even more attractive hedge against the Sell In May theory.
Apple (NASDAQ: AAPL)
Say all you want about Apple’s recent slump (as I did just a few paragraphs ago). It’s still one of the fastest-growing stocks on the market over the past five years – regardless of season.
Here’s how Apple has performed during the past four Sell In May periods:
2012: +2.3% (vs. a market average of +1%)
2011: +17% (vs. a market average of -8.1%)
2010: +16.5% (vs. a market average of -0.3%)
2009: +48% (vs. a market average of +18.7%)
Add them together, and Apple’s average return of 21% the last four Sell In May periods is more than 7 times better than the 2.8% return of the S&P 500.
With Apple shares fresh off a 16-month low and trading at less than 10 times forward earnings, the stock is well positioned for a fifth straight rally during the market’s traditional lull period.
Bottom Line
Sell In May has a tendency to scare investors off – and with good reason.
But there are opportunities to make money between now and November. And considering two of the four largest companies in the world have been among the best May-October performers in recent years, you don’t have to look too hard to find stocks that regularly buck the Sell In May phenomenon.
*Full Disclosure: I currently own shares of both Apple and Google.