Sell in May and go away? Here is a smarter investing play by Kyle Caldwell
A new investment strategy claims to have identified the shares that perform well in summer. Meet the “Consistent Summer Smoothie Portfolio”
Investors have been urged to ignore the old adage that tells investors to “sell in May? and instead buy shares that have historically performed well in the summer months.
Interactive Investor, the broker, argues that it is possible to predict the summer share winners.
It has identified a basket of shares that typically do better in the summer months and to profit from the trend has launched the Consistent Summer Smoothie Portfolio.
The launch comes after the broker last year offered a Consistent Winter Portfolio, which held shares that tend to perform better in the winter months. From November 1 to the end of April the portfolio it returned 17pc, ahead of FTSE 350 index return of 10pc.
In the portfolio, shown in the table below, it holds five shares that have at least an 80pc success rating of beating the stock market between May 1 and October 31.
Interactive Investor said this portfolio would have produced an average annual return of 8.9pc over the past decade, compared to 0.3pc for the FTSE 350 index.
[Table removed – see full article]
The broker is also offering a Aggressive Summer Sizzler Portfolio. This comprises the five best performing shares in the summer months over the past decade that more often than not beat the market.
This portfolio would have returned 17pc a year, on average, over the past decade.
Why do certain shares perform well in the summer?
In some cases arguments can be made to explain the seasonal behaviour.
For instance Diageo, the maker of Guinness, is likely enjoy a pick up in sales in the summer months with the warmer weather.
But for other shares it is hard to nail down a firm reason as to why they have outperformed over the past decade.
Stephen Eckett, author of the UK Stock Market Almanac, which analysed stock market patterns and anomalies, said: ?It is possible that the share prices of many stocks fluctuate in regular, albeit different, cycles. In some cases, it may be simple to find an explanation for the seasonal behaviour; for example, Greene King shares are often strong in the months of June and July as investors probably anticipate good sales in the summer. But not all such seasonal share price moves have such an obvious explanation.?
The broker sells the portfolios for a single £10 trade rather than the £50 cost for buying each stock individually.
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