St Leger’s Day adage: were investors right to sell-out in May this year?

Otmane El Rhazi from Mindful Money » Shares.

With the St Leger’s festival imminently arriving, Graham Spooner, investment research analyst at The Share Centre, explores whether the historic tactic has benefitted investors this year…

As we approach St Leger’s Day 2015 this Wednesday, equestrian enthusiasts can look forward to the oldest classic horse race in the world, first run in 1776. For investors this day identifies with the strategy of “sell in May and go away, stay away ‘til St Leger’s Day”, which is based on the historical seasonal decline in the markets.

Earlier this year, we suggested five ‘buys’ for investors that might have defied this perceived logic. Looking back, how would you have done if you have sold up for summer? And how did our five shares fair against their benchmark index?

Over the period the FTSE 100 fell by around 12% and the FTSE 250 by close to 3%. Breaking it down a little further it will come as no surprise that if your portfolio was geared or overweight mining and oil shares or exposed to other global markets and especially emerging markets then selling in May would have been a very rewarding strategy. For anyone else with a more balanced UK portfolio, then once dealing costs have been taken into account, it may not have been quite so clear cut.

Our five shares to consider over the summer were; Booker, Marston’s, Easyjet, Compass and Restaurant Group.

Starting with the two blue chip FTSE 100 constituents, Compass fell by exactly the same amount as the index – mostly on the back of slowing demand from the offshore oil & gas industry. Easyjet outperformed the index, helped perhaps by the ones who sold and booked their flights to go away, but was still down by around 2%. There was better news from one of our mid-cap selections. Whilst Restaurant Group was down by 3% and Marston’s was down 5%, they both did no more than follow their benchmark. The star performer was Booker which rose by 26% against a 3% fall in its benchmark. The group’s May results, accompanied by the acquisition of Londis and Budgens, were well received and the latest trading update in September has helped underpin the fine performance of its shares.

In summary, our five picks (with the help of Booker) would probably have made you a little richer. The evidence for selling in May in recent years is hardly overwhelming. However thanks to China, this year will be viewed as one that would in general have rewarded investors. Another saying is that hindsight is a wonderful thing. We would recommend that investors look at what is best for their portfolio and not literally base their investments on old sayings, proverbs, adages or folk law.