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Should have sold in May and gone away?

Monday, May 7, 2012

In The Straits Times and The Business Times today, there are at least three articles which mentioned "sell in May and go away" and whether it holds any water. Has anyone sold a large part or all of their investments in the last few trading sessions?



Well, today, global stock markets retreated as the Greeks and the French elected new leaders into government. They are sick of austerity measures and they spoke with their votes! European debt story is still very much the key sentiment driver for global stock markets, it would seem.

Asian markets and the euro slumped on Monday after voters in France and Greece voted out their ruling parties in a backlash against austerity measures aimed at battling the eurozone crisis. Read article here: CNA.

I am not an economist. I am not a political scientist. Some issues are definitely beyond me. So, what do I do?

Someone just told me that timing is everything and that now seems like the right time. Right time? For what? I replied that things are increasingly more volatile and I find it harder to time anything.

I am chanting the same mantra to myself and that is to stay invested for income while keeping a war chest ready. This is the only strategy I know which would work either way.

I know that the majority of my portfolio which is in S-REITs is actually doing better now than a few months ago. My more recent investments are not doing as well, notably China Minzhong, SoundGlobal and Wilmar. These investments were made as the counters' share prices retreated from recent highs. Do I press the panic button? I like their businesses and I believe they would probably be around for a long time to come. I like the investment themes of agriculture and water. So, I am staying vested. I would probably add to my long positions too if TA shows me clearer signals to do so.

Don't panic. Stay clear headed. Revisit reasons for being invested in the first place. Are the reasons still valid? Are the investments still fundamentally good? If you want to buy more, what does TA tell you? Think with our heads and not our hearts. Good luck.

Related posts:
1. Sleep well at night with a plan.
2. Why do I not panic?

63 comments:

INVS 2.0 said...

Hi Ak71,

Buy in May and laugh away.

Ray said...

I sold most of mine when the Market was doing better last week. I still hold on to some REITs and growth stock but have sold most of my cyclical ones. I subscribed to the "sell in May and go away" thingy. It has been true for at least the last 7 years. These things can affect investors and hence people stay away from stock. I don't want to bet against the market.

Like you, I am also vested in CMZ and 0.84 seem to be holding but if Europe turns bad (after Greek and French elections), I suspect the MArket will go down further.

Hence, your wisdom of keeping a war chest is what I'm following now too :)

Temperament said...

Hi AK71,
i think a lot of people talking
about timing the market without really understanding why it's very difficult and next to impossible to do it correctly. If you really understand, you will know you only can time the market after it happens and never before.
So what is the next best timing strategy? Ask AK71 lol. He has shown success in his strategy. Ha! Ha!IMO
Caveat Emptor!

Unknown said...

HI
what do you think about sabana reit. It div is high,

can please give your view.

thanks
victor

Unknown said...

Hi
I m sorry, it is me, victor again.
Actuall, i would like to ask, is this the time to buy., or should i wait for mkt to come down, or shd i use averaging to buy.

thanks
victor

Singapore Man Of Leisure said...

AK,

You know what? When "investors" react to every sound bite or market volatility, I guess there goes their "weighing" machine... LOL!

There's quite a lot of hyperbole out there. One blogger wrote SGX "crash" 2% yesterday...

It's not even near correction territory?

OK, if you trade SIMSCI futures with 10 to 1 leverage, I concede 2% is a huge move!

I like the way you always keep a clear head on your investments.

Our methods differ; but I respect the giant oak in you. You don't sway in the wind like the willows ;)

AK71 said...

Hi INVS 2.0,

Hope you understand Cantonese:

Laugh away!

:)

AK71 said...

Hi Ray,

I am glad it is working out for you. :)

I haven't sold anything for a while now. War chest is smaller. :(

Now, I am just waiting for dividends to come in over the next few weeks. What a slacker! ;p

AK71 said...

Hi Temperament,

I buy when I see value which might not be the best time since price could decline further. I believe we can get in at a good price but getting in at the best price would need a great deal of luck. :)

Caveat Emptor indeed! ;)

AK71 said...

Hi Victor,

Sabana REIT is my largest investment in the S-REIT universe. I like its numbers which include its high distribution yield. :)

Should you invest now? Should you wait for prices to come down more? I don't have clear answers for these.

If I want to invest for income and have zero exposure now, I might consider getting some initial exposure. Valuations are not cheap but neither are they expensive. I would do this bearing in mind that it is hard to tell if prices would go lower or higher from here.

Also, I would make sure I have ample reserves so that I could buy more if prices should weaken.

So, should you buy now? It's your call. ;)

AK71 said...

Hi SMOL,

You think too highly of me. I must say that I am only human and I stumble and fall from time to time too. As long as I stay fall free 90% of the time, I am happy.

I don't really fancy myself being an oak tree. I would like to be a bamboo. ;)

I am not averse to learning new things although I am a lazy guy. If I gotta do it, I do it:

How did AK71 overcome his losses and grow his portfolio?

Bamboo is strong and resilient too. I hope I am that. :)

Howyuan said...

frankly, i am worried.

that's why i moved about 30% of my equity mutual funds into balanced funds. but as for stock holdings, i am keeping them while waiting for the crash to come. *evil laugh*

and one more thing. over the years, i noticed that my mutual funds are more volatile and perform worse than my stocks, while they are supposed to diversify.

something's really wrong here.

ron said...

The ability to hold out is a virtue.

Markets can swing up and down.
But like you said in your latest post: revisit the reasons why the stock was bought and ask if anything has changed.

It becomes trading if we keep going in and out.

Its investing that is the primary purpose.. and unless there are fundamental reasons such as LMiR has changed its business into logistics and transport, stay the course.

Sell in May?

That means there are buyers.
If the price is right, buy it.

Would 0.55cts be attractive for First Reit?

Some have given the impression that their entire portfolio has been liquidated in May.

This is untrue, from an investment angle.

Perhaps liquidated 30% and remained invested 70% could be more accurate.

The reason being: by the time a decision is made to reenter, the prices could have gone up too fast.

My view is to remain invested and with a war chest fully loaded and armed... pick your targets NOW.

There will be 2 more and even deeper dives this year.. remain alert... PICK YOUR TARGETS NOW.

AK71 said...

Hi Howyuan,

I sold off most of my unit trusts prior to the last global financial crisis and never looked back. I am better off being my own fund manager. ;)

However, if we were to invest in the depths of a crisis with money in our CPF-SA, we would have to park the money in unit trusts. This was something I did in the last crisis and it made me 4.5x more returns than what the SA interest would have given me. :)

See: SRS, CPF-OA and CPF-SA.

AK71 said...

Hi Ron,

Sounds like you have your shopping list ready. :)

It is definitely a blessing to be able to see so clearly. Two deeper corrections on the way? I won't be surprised if your predictions turn out right.

In fact, Dr. Marc Faber believes that the markets are ready for a deep correction. I am waiting...

Unknown said...

Hi

Thanks for your reply

What u think of the euro, if it really collapse then, evry stock will be hit, but as again, to time mkt is defeat, So i think to use averaging.
What do you suggest?

AK71 said...

Hi Victor (I guess),

Please refer to my earlier replies. Ask yourself some crucial questions and move accordingly.

My strategy is to stay invested for income with a war chest ready. It might or might not be suitable for you. You decide. :)

axt said...

Hi AK,

I will be awaintg your blog/thoughts on the recent purchase by CACHE. :)

YH

AK71 said...

Hi YH,

Not much to say about this one. Nicely summarised by OCBC Research:

"Cache announced that it would acquire Pandan Logistics Hub (PLH) for S$66m via a sale and leaseback arrangement with CWT Limited. PLH, a five-storey ramp-up logistics warehouse, has a GFA of 329,109 sq ft and is presently fully-occupied. The contracted average lease term is 4.3 years and NPI yield is 7.6%. The acquisition is expected to be wholly funded by debt, which we view favorably and expect accretion to the REIT’s DPU yield upon completion."

DPU is going to bump up a bit as is gearing. Generally, this is good news for unit holders. :)

coven said...

Hmm have started to divest some of my pref shares and reits. Hoping to hold some cash for good buying opportunities in stocks. Reits have gone up quite a bit, not sure if they will go up further :) as the market starts to pull back to 2900 support

AK71 said...

Hi coven,

Are REITs more resilient than STI component stocks? The jury is still out on this one. ;)

For sure, taking profit is never wrong. :)

FoodieFC said...

haha

'should have sold away'
' if i have known when the price goes up or down'

if i know those 2 above, I do not need to work full time. You can also retire haha

*can only dream on*

Darn...i should really have sold some of the shares I am holding! =P

AK71 said...

Hi FoodieFC,

I wonder if anyone has a crystal ball that works. Mine is cloudy all the time. ;p

INVS 2.0 said...

Hi Ak71,

If I am not wrong, Saizen has released its quarterly result. Any comments on this? :)

AK71 said...

Hi INVS 2.0,

I am wondering whether to do a blog post on Saizen REIT. Not much to say actually.

OK, maybe a short blog post later. ;)

Unknown said...

Hi AK
Could i know what are invested in.Your investment porfolio

It doesn't matter, if it is confidential.

thanks
victor

AhJohn said...

hi, AK, do you invest some in bonds? how do you think about it? Thanks!

AK71 said...

Hi Victor,

I have blogged about my investments before and you could probably build up a pretty accurate picture of my portfolio if you read my past blog posts. ;)

In a nutshell, currently, my invested cash is about 70% in S-REITs and 30% in Singapore companies. So, you can imagine that I am primarily invested for income.

Recently, I invested in some companies with growth stories such as China Minzhong and SoundGlobal but, usually, I would invest in companies which pay attractive dividends such as SPH and ST Engineering.

AK71 said...

Hi Ah John,

Well, bonds are good for people who want a stable income in nominal terms. If I were to invest for income in Singapore, however, I would rather invest in some S-REITs. ;p

Of course, there are perpetual bonds these days and they seem to be the rage. I wrote a piece on these not too long ago:

Perpetual bonds: Good or bad?

Ah John said...

Put a buy order at 0.75 for Minzhong, never thought it can be filled, but it did!

AK71 said...

Hi Ah John,

The company announced lower quarterly profits yesterday due to increasing costs. 1Q profit falls 7.8% to $48m. This probably added to downward pressure.

I still want to get more China Minzhong's shares. The downtrend is intact but the volume is not high. I see a low volume pull back happening.

I know I should wait for the dust to settle but let's see if I could get some at 70c today as that would be almost 30% lower than my initial purchase. Ouch...

After fresh purchases earlier this month, Templeton now owns 11+% of China Minzhong's shares. Between them and GIC, they own almost 30% of the issued shares. I like this. :)

AK71 said...

Hi Ah John,

My 70c buy order was filled and now it is 68.5c. Could go lower. Haha.. Dust is still flying. ;p

JJ said...

Hello AK,
Just curious why u bought this, no divident right? Its value stock.
Thanks for sharing.
JJ ;)

AK71 said...

Hi JJ,

Yes, no dividend. It is a growth stock. Well, its share price has been shrinking. Haha... That is good news for anyone fishing for value.

I believe what Jim Rogers says about impending food shortages. He keeps telling people to be farmers.

I am a lazy fellow. So, I do the next best thing. I invest in an agri company. ;p

China Minzhong is rather undervalued. It could be punished because of poorer results in the last two quarters. If we believe that it would do better in the next two quarters, we should be looking at accumulating on further weakness. :)

Ray said...

I thought at 85cents, the stock has found a floor but it plunged after the results were released. Cut loss at 72cents which looks like a good move on hindsight because the price is still dropping.
Will collect it back when dust settles.
AK, if you notice positive divergence, pls blog abt it :)

AK71 said...

Hi Ray,

Seems like you did the right thing. Good on you. :)

My initial purchase is now 40% down. Sob.. :_(

My itchy fingers tikam at 70c. Double sob.. :_(

See? This is the result of not waiting for signs of a reversal... No positive divergence. In fact, OBV is also down which suggests distribution activity is ongoing as momentum stays negative.

However, on the weekly chart, I see the stochastics in oversold region meeting the signal line as if preparing for a positive cross over. This suggests that the deeply oversold situation could see a rebound in time. Short covering would probably cause this.

When a counter has been heavily shorted down, the short covering could see a violent rush upwards in price. How many shortists are there trying to maximise their gains?

Ray said...

My fingers were itchy with Wilmar also... now burnt fingers :(

Anyway AK, how do we know which companies are presenting their quarterly / yearly biz performance and when?

Is there a calendar on SGX?

AK71 said...

Hi Ray,

Wilmar... Me too... Sob :_(

I don't know if SGX has a time table for the purpose you mentioned. I know some brokers do it as a service.

Unknown said...

If people think sell in May, then why not we buy from them cheap and sell in October.
I believe the euro will compromise once again, Greece want to stay in euro, if not they will be even worse situation then with austerity. And euro state will lose a bomb if they allow Greece to default.
Then, last time , mkt rally again till end of the yr.
Relax, AK, i believe thing will turn out right in the end, and those buy in May will laugh away in October. I bought a little, i will buy in the days to come slowly.

Unknown said...

Hi AK
What will happen to stock if recession hit? I believe stock will get whack down, and this ECRI is predicting a recession in middle on this year, and it is only become obvious by end of the year, but in the mean time, i would assume GDP growth to be lousy, so stock may still soar, when CB Ben come out with QE or stimulus.
So i think now till end of yr will be safe, But Jan GDP report will be negative, i assume.
So i am taking a gamble to buy now and sell in early Q4. I still believe rally will follow till Q4.

http://www.businesscycle.com/news_events/news_details/5086

AK71 said...

Dear Unknown,

Thank you for sharing your optimism with the rest of us here. Much appreciated. :)

I think you say it well when you say you are taking a gamble to buy now.

Gambling is about odds. Are the odds in our favour if we buy now? I think you have an answer although some might not agree.

Personally, I think it is clear that sentiments are still bearish and if I were to buy with some amount of confidence, I would want to do so when the technical signs show that support is at hand. At the moment, I don't see this.

In cases where there are violent and rapid reversals, there might not be enough time for technical signs to fire. So, my strategy is not a perfect one, for sure.

Whatever we do, we have to be comfortable with our choices. Everyone has a different level of risk appetite. Choosing the path we walk best is probably the best way. :)

Unknown said...

Hi AK
victor here, i m sorry, actually the 2 post by unknown was me. I did not notice it.
So i am stating it here.
But then again, this Achuthan said the recession is going to be a mild one. Hope so

http://www.businesscycle.com/news_events/news_details/5094

Unknown said...

Hi AK and friend
just to share

http://seekingalpha.com/article/596121-buy-in-may-and-sell-away-update?source=email_macro_view&ifp=0

victor

AK71 said...

Hi Victor,

Thanks for sharing the link. :)

Well, for everyone's sake, I hope that Greece would be able to stay in the eurozone. Imagine Greece leaving the eurozone and defaulting on its $500b worth of debt. It would cause a chain reaction. Think of the Lehman Brothers crisis but magnified!

I am going to err on the side of caution and not add to my long positions unless signs are clearer that things are getting better. There is no sense in throwing good money after the bad.

Unknown said...

I do not see Greece go under,
all fear suffering, i believe they will compromise.
The real problem will be next year, or latter part of Q4.
Because during these tress period business hold back, economy go into tailspn, this will be reflected in 2013, that is when they will really be against the wall.
I will sell, no matter what by September to october.
i m just sharing my view, not a call.
May all of you be well.

victor

AK71 said...

Hi Victor,

It is definitely good to have a plan and you have one. Thanks for sharing it with us here. :)

2013 looks like it could be a difficult year then...

Unknown said...

i think the correction is near over, we are some 8% down for sti, if it is real bad, than 13% down, i will sell all and side line, if on really bad news.
support is ard here. 2700 to 2750
hope we are fine.
fear not, i m looking to buy first reit, sabana, for long term anytime soon.

victor

AK71 said...

Hi Victor,

Sabana REIT would look very attractive at 90c or so. First REIT would too at 80c or so.

Good luck to us all. :)

Unknown said...

Greed and fear.
Fear is the greatest factor, that is why mkt come down steeper, than it climb, but we shd not miss the forest for the tree.
It is still up in the long run, even if greece declare bankrupt.
we will hit bottom, and soon it will be history.
hope you fear not, be greedy when other fear. I m grreedy now , but i do not when to eat.
so , eat slowly, at least i wnt get choke if Greece really implore.

victor

AK71 said...

Hi Victor,

Indeed, be greedy when others are fearful... ;)

I still remember buying more units of First REIT at 42c and Sabana at 86.5c. :)

Unknown said...

This not time to sell, if want to sell that was last week, now sell is useless, now shd be looking to buy,sell the greed, buy the fear and panic,
mkt is depress, we shd not, if you lose, the lose is there, why lose ourselves.

victor

AK71 said...

Hi Victor,

Indeed!

Very philosophical. I like your temperament. :)

Unknown said...

Hi AK
I like your site here, very useful.
i will take note of the px u state for sabana and first reit.

May all be well.
victor

AK71 said...

Hi Victor,

I am glad you like my blog. :)

My crystal ball is cloudy at best. So, please do not take my target prices as the Gospel truth.

Mr. Market is perverse at times but Lady Luck is always whimsical. Yes, we can only hope that things turn out well. :)

Ray said...

Hi AK,

What do you think is an attractive price for LMIR?
It's DPR isn't doing so well so do you think you will lower your entry price for this?

Unknown said...

Hi AK
first reit is medical mostly, so recession proof, and sabana a newly listed , so they are mostly safe, m i right?
Anymore, u can list them for my consideration. I find you are very good in reit.
thank for this site.

victor

AK71 said...

Hi Ray,

With LMIR, whether it could deliver a DPU of 3.26c per annum as per my estimate is unknown. Based on its last DPU of 0.69c, which in my opinion is really an underperformance, we have an annualised DPU of 2.76c.

I need a distribution yield of about 8% to feel comfortable with investing in LMIR. So, a unit price of 34.5c or so would be good enough for me. :)

AK71 said...

Hi Victor,

My opinions of First REIT and Sabana REIT have not changed since my last blog posts on them.

See:

Sabana REIT.

First REIT.

Hope the blog posts are helpful. :)

Unknown said...

Today, i bought Ying Li, i like the analysis by SIAS. I also bought some First reit got it at 85. and sabana got nothing.
all i intend to keep till end of yr.
wish all good luck here.

victor

Ah John said...

Hi AK, SPAusNet is offering 3 for every 20 share with A$1 per share. How do you think of this kind of thing? Can buy in?
Thanks.

http://yieldstocks.reitdata.com/2012/05/17/spausnet-bt-14/

Chenghui

AK71 said...

Hi Victor,

A hearty welcome to First REIT. :)

AK71 said...

Hi Chenghui,

I am not familiar with SP Ausnet but if you have seen my blog posts on rights issues before, you would know that I like them if they are to fund growth which would benefit stakeholders. I don't like them if they are used to strengthen balance sheets (AKA paying down debts).

So, what is SP Ausnet using the funds to be raised for?

Unknown said...

Hi Victor here.

Just to share.Will this time, mkt soar from here??will S&P hit 1538?? Hope so. But if TLT keep heading up, then mkt crash will be a reality. Hope not.

The Peak Of Fear
May 18, 2012 | 12 comments | includes: DIA, SPY, TLT
Are we witnessing the peak of fear once again in the capital markets?

In what is becoming an almost quarterly ritual, investors are running for the hills as the fear of a European meltdown is driving down equity prices and hammering down yields on US treasury notes.

On May 17, 2012 the U.S. 10-Year Note Yield closed at an all-time low of 1.702%.

Will the global capital markets finally tumble into the abyss or will we step back from the brink once again, and see another unexpected relief rally?

We noticed something very interesting: the TLT (TLT) closed at 124.17 today.

Over the last 12 months any time the TLT has traded above 122 it has signaled the end of equity sell-offs (peak of fear) and the beginning of a new equity bull run.


(Click to enlarge)

Let's look at what happened to the SP500 on the two previous dates that the TLT traded above 122.00.

October 4, 2011 - the TLT hit an intra-day high of 122.16 and the SP500 hit an intra-day low of 1,074. The SP500 rallied from this low and hit a peak high of 1,284 on October 27 for a gain of 19.5% since the 122 reading on the TLT.
December 19, 2011 - the TLT hit an intra-day high of 122.43 and the SP500 hit an intra-day low of 1,202. The SP500 then rallied from this low and hit a peak high of March 26, 2012 for a gain of 17.8% since the 122 reading on the TLT.
On May 17, 2012 the TLT hit an intra-day high of 124.28 and the SP500 hit an intra-day low of 1,304.

An 18% bounce in the SP500 from this low (similar to the bounces that occurred in October and December) would bring the SP500 to 1,538.

Will this time be different or have we once again hit the floor for the yield on U.S. Treasury notes? That is, there is nowhere to go but up from here for yields, which in turn means that equity markets will also stop falling and we will experience a strong 'risk-on' rally?

If we do see a 15% to 19% rally in the SP500 over the next six weeks we will be able to officially name the TLT as the new Peak Fear Indicator for capital markets.

If no equity rally ensues and the TLT keeps climbing higher, and U.S. Treasury note yields keep falling, then something terrible is about to strike at the heart of the global capital markets.

The darkness drops again but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

--W.B Yeats, The Second Coming

Disclosure: I am long SPY.

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