Sell In May And Go Away? Not Me!

Includes: QQQ, SPY
by: Russ Fischer

Sell in May and go away?

Below are the numbers from Yahoo for 2000 to date on the S&P performance for the months of May through September and for the month of May alone.

Year May through September May only
2000 -1.6% +3.1%
2001 -15.5%* -0.5%
2002 -25.4%* -0.6%
2003 +10.6% +6.1%
2004 +1.4% +2.1%
2005 +2.0 +2.1
2006 +1.8% -2.7%
2007 +3.4% +2.0%
2008 -22.2%* -3.7%
2009 +23.9% +6.0%
2010 +4.9% -0.5%
2011 -13.8%* +0.5%
2012 +6.6% -4.3%
Cumulative Loss/gain -28.8% +9.3%
Five Negative Years Six Negative Years
Eight Positive Years Seven Positive Years

*2001-2002 was the "Tech Wreck" that continued throughout the two years and was caused by a tech bubble and 70-100 P/Es. That was followed by five years of May-Sep gains.

*Everyone knows about 2008 and the Great Recession and associated stock market plunge which, surprisingly, recovered in 2009.

Somehow the whisper of "Sell in May and Go Away" gained sway over the past decade.

*Due to this and 28% gains over the prior two years, 2011 might have become a "self-fulfilling prophecy," and as such is the only real unexplainable May-September plunge.

2012 started down the Sell Road and then recovered to make May-Sep a net positive.

With CNBC harping on the "idea" of Sell in May…, we might have a repeat of 2012; Down in May and recovery in June through September, but maybe not.

It would have been very productive to recognize the crazy valuations of large tech stocks in 2001-2002 and scale back on overpriced stocks. I begged my friends to sell Intel (NASDAQ:INTC), Cisco (NASDAQ:CSCO), and Lucent Technologies. Intel, of the three, has grown into the valuation of 2000.

Likewise, it would have been very productive during 2005-2007 to recognize that anyone with a beating heart was being handed money to buy houses that they couldn't afford. Hindsight is crystal clear about what happened next. A bomb shelter would have been appropriate.

It would have been very productive to pay attention to President Obama's call of the stock market bottom in March of 2009. That was an unprecedented call for a sitting president. Fortunately, I was of the same opinion.

What can happen this year?

The consumer is getting healthier and smarter. Companies are profitable and have an unprecedented level of cash and, with some exceptions, are selling for reasonable valuations with regard to P/E, PEG ratios, and dividend yield. Interest rates are low. Home prices are recovering, so we need to watch for crooks repeating the bubble behavior. Inventories are low. Management is constantly "looking over their shoulder," which is healthy. Energy independence is progressing at a breathtaking rate.

The economy is slowly climbing out of a very deep hole with the Fed providing a ladder and first aid for the economy for the foreseeable future.

The Fed is continuing to hold the banks' feet to the fire with higher reserve requirements and reasonable behavior. Over the past few years, I have come to ignore the "Fed Haters."

As investors, we need to drive a stake through the heart of "Sell in May and Go Away," and many other silly ideas that are fed to us by our friends on Wall Street.

I'm not selling, too many good things happening.

Disclosure: I am long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.