So How Is 'Sell In May, Go Away' Working Out This Year?

by: Jacob Steinberg

During late April and early May, a large number of articles (for example: this and this) surfaced in financial websites such as Seeking Alpha, discussing pros and cons of the well-known theory of "sell in May, go away." According to the theory, the stock market tends to result in bad returns between May and September. One such example was last year when the market was very volatile and it lost a lot of value between May and October. Let's see how the market has been doing this year since May.

Dow Jones Industrial

In the beginning of May, Dow Jones Index (NYSEARCA:DIA) was around 13,213 points. Towards the end of the month, the index fell all the way to 12,101. Later on, it started to climb up and as of August 9th 2012, it sits at 13,165 points. Since the beginning of May, Dow Jones is down by 48 points or 0.37%. Since the end of May, Dow Jones is up by 745 points or 6%. Some of those that follow "sell in May, go away" sell their stocks in the beginning of May, others do it at the end of the month. Those who sold in the beginning of May have been better off than those that sold at the end of the month. However, those who bought at the end of May and held till now have seen the best returns.

S&P 500

As the month of May started, S&P 500 index (NYSEARCA:SPY) was sitting at 1,405 points. By the beginning of June, the index fell to 1,278 and then recovered back to 1,400 points it enjoys today. Since the beginning of May, S&P 500 index is down by 5 points or 0.3%. By the last day of May, S&P index was sitting at 1,310 points, which is 90 points below today's value for the index. Again, according to the movements of S&P 500 index since May, those who sold their stocks in the beginning of May are better off than those who sold their stocks off by the end of the May. Those who bought in late May and held on to their stocks will be in the best shape.


Nasdaq index (NASDAQ:QQQ) behaved very similar to the two indexes previously mentioned. On the first day of May, Nasdaq was at 3,050 points. It fell all the way to 2,747 points by June 1st. After that, the index rallied back up to 3,011 points it enjoys today. Since May 1st, Nasdaq lost 39 points; however, since May 31st, it gained 184 points. Those who bought in late May and held till today performed better than those who sold and went away assuming that they got nearly zero return as interest rates are very low right now.

Select Stocks

How about some of the more popular stocks; how did they perform since May? The share price of Apple (NASDAQ:AAPL) was $582 on May 1st, $577 on May 31st and $620 today. Investors of Apple didn't fare that bad if they held their stocks since May. ExxonMobil (NYSE:XOM) enjoyed a share price of $87 on May 1st, $79 on May 31st and it currently sits at $88 as we speak. Your return on investment will vary depending on when in May you actually got in Exxon (keep in mind that Exxon had a dividend totaling 57 cents per share in mid-May). Not all stocks performed that well though. Microsoft (NASDAQ:MSFT) was trading for $32 per share on May 1st, $29 per share on May 31st and it currently trades for $30 per share. The company distributed dividends of 20 cents per share in mid-May.

Of course, if you were holding companies like Ford (NYSE:F), Nokia (NYSE:NOK), Chipotle (NYSE:CMG), Starbucks (NASDAQ:SBUX) or Netflix (NASDAQ:NFLX), you would have been much better off by selling in May and going away. Many companies saw drastic drops in their market value since May.


Since May, gold (NYSEARCA:GLD) price is slightly up; oil prices fell in June but started to recover; and the European crisis continued to dominate the markets, but didn't create much damage in the stock prices. The European debt crisis is not yet under control; however, many investors seem to expect ECB to take bold action regarding the matter sooner or later.

What's Next?

In the perception of the investors, "sell in May, go away" season ends in around September/October and the Holiday-Santa rally starts afterwards. The "Santa rally" was very impressive last year and many will expect something similar this year. I don't know if the Santa rally will materialize or not this year, but I know one thing. Many investors who followed "sell in May, go away" with their money will come back to markets, usually on the long side. This should help the market. The fact that we are in an election year should help the bullish sentiment too.

So, how did "sell in May, go away" perform in 2012? The results are pretty mixed and they depend on when in May you actually sold your stocks and which stocks you sold/bought/held. I personally held most of my stocks during this period. I am more a fan of "sell covered calls in May, go away" rather than "sell stocks in May, go away." That way, even if the market stays flat, you are still forking out some returns.

Disclosure: I am long AAPL, XOM, NOK, F.