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Author: Zeelotes Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 253834  
Subject: Sell in May or Rotate Sectors? Date: 5/7/2005 3:51 AM
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I've been planning to post this and had hoped to get it done before May 1st, but got distracted with other research. As you know, I'm a big fan of season and cycle research. One of the most common adages on Wall Street has become known as Sell in May and Walk Away. As I've already shown in a number of seasonal studies I've posted here there is a lot of truth to this approach if practiced with a tad of wisdom and caution.

Here are a few recent articles on this theme:
http://money.cnn.com/2004/04/30/markets/sell_in_may/
http://businessweek.com/investor/content/may2005/pi2005054_2535_pi039.htm

The latter one is an especially good read.

But what I wanted to post on today is the fact that not all sectors respond equally to this seasonal influence. The data I'd like to share comes from TC2000 and Media General Industries. I only have data from them over the period from 1987 to 2002, so I'm lacking the last two years, but I think you'll get the point.

I broke all the periods down into just the returns from May 1st to October 1st. The reason I did this is that often the market reaches a bottom in October and I wanted to find the returns before the bottom was reached. I then took all the returns for each industry and divided them into Presidential Years. Of course, right now we are in Presidential Year One. Here are the industries with a 100% win ratio for this year from 1987 to 2002:
Note: I define a 100% win ratio only if all returns are > 3%.
             1987 to 2002                                                    
Symbol YEAR ONE AVG StdDev % POS P N High Low
Averages 19.52% 11.67 100.00% 32.94% 6.50%
WG180 Beverages-Soft Drinks 12.97% 10.68 100.00% 4 0 27.75% 4.42%
WG200 Building-Manufact Hous 18.74% 12.90 100.00% 4 0 35.95% 5.29%
WG240 Business-Print/Publish 13.02% 6.83 100.00% 4 0 19.44% 3.67%
WG340 Savings 27.34% 22.25 100.00% 4 0 56.41% 5.19%
WG560 Hospital Management 16.77% 2.74 100.00% 4 0 20.51% 13.99%
WG780 Toy/Game Manufactures 28.25% 14.63 100.00% 4 0 37.60% 6.46%

So on October 1st someone can remind me and I'll run the numbers again and see if these six industries did well or not.

These are the results for all years:
Symbol        ALL YEARS          AVG   StdDev  % POS   P   N   High     Low                     %
Averages 7.38% 14.96 72.66% 33.22% -21.57% UP DOWN FLAT UP
WG770 Tobacco 10.98% 13.52 81.25% 13 3 47.26% -13.50% 12 2 2 75%
WG180 Beverages-Soft Drinks 2.78% 14.87 68.75% 11 5 27.75% -31.84% 11 3 2 69%
WG340 Savings 13.09% 22.40 75.00% 12 4 56.41% -24.14% 11 4 1 69%
WG360 Drug Manufactures 7.47% 11.11 68.75% 11 5 21.70% -18.92% 11 3 2 69%
WG420 Food Production 6.84% 8.80 81.25% 13 3 18.77% -11.56% 11 3 2 69%
WG540 Medical-Products 7.43% 10.97 68.75% 11 5 28.91% -9.29% 11 4 1 69%
WG730 Retail-Specialty 1.01% 15.93 68.75% 11 5 23.59% -33.77% 11 5 0 69%
WG780 Toy/Game Manufactures 9.40% 22.09 68.75% 11 5 41.39% -29.57% 11 4 1 69%

None reach the 100% level for year two -- next year:
Symbol       YEAR TWO         AVG   StdDev  % POS   P  N   High     Low                     %
Averages 2.76% 17.56 75.00% 14.25% -23.09% UP DOWN FLAT UP
WG360 Drug Manufactures 6.18% 17.26 75.00% 3 1 18.33% -18.92% 3 1 0 75%
WG690 Retail-Food Stores -4.17% 21.89 75.00% 3 1 9.15% -36.86% 3 1 0 75%
WG770 Tobacco 6.26% 13.53 75.00% 3 1 15.28% -13.50% 3 1 0 75%

For those who want to see all the data, here are the results for year three and four:
Symbol        YEAR THREE          AVG   StdDev   % POS   P  N   High     Low
Averages 15.97% 9.74 100.00% 28.88% 7.30%
WG240 Business-Print/Publish 12.01% 8.66 100.00% 4 0 23.49% 4.57%
WG290 Computer-Software 22.64% 5.66 100.00% 4 0 25.99% 14.18%
WG300 Computer-Systems 14.44% 7.67 100.00% 4 0 23.66% 5.59%
WG352 Diversified-Manufactr 11.85% 8.95 100.00% 4 0 25.13% 6.47%
WG590 Metals-Copper 24.50% 18.53 100.00% 4 0 51.44% 9.40%
WG730 Retail-Specialty 10.39% 8.96 100.00% 4 0 23.59% 3.60%

Symbol YEAR FOUR AVG StdDev % POS P N High Low
Averages 13.74% 7.75 100.00% 23.96% 6.26%
WG170 Beverages-Alcoholic 8.50% 5.25 100.00% 4 0 14.78% 3.71%
WG340 Savings 24.46% 14.02 100.00% 4 0 44.18% 11.67%
WG350 Diversified-Financial 14.85% 6.95 100.00% 4 0 24.86% 9.87%
WG420 Food Production 10.29% 3.49 100.00% 4 0 14.65% 6.13%
WG450 Insurance-Life/Multi 14.79% 10.06 100.00% 4 0 27.81% 3.28%
WG460 Insuranc-Prop/Casualty 13.88% 6.27 100.00% 4 0 22.67% 8.10%
WG780 Toy/Game Manufactures 10.35% 7.61 100.00% 4 0 20.81% 4.16%
WG830 Utilities-Natural Gas 12.77% 8.32 100.00% 4 0 21.90% 3.12%
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Author: fred04 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172217 of 253834
Subject: Re: Sell in May or Rotate Sectors? Date: 5/7/2005 10:47 AM
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rotating into either the S&P consumer-staples or health-care sectors during May through October

Another approach might be to buy gold or gold miniing stocks starting in May or silver in July.

http://www.seasonal-charts.com/index.htm

Disregarding. Do your studies agree?




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Author: chrisjames Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172219 of 253834
Subject: Re: Sell in May or Rotate Sectors? Date: 5/7/2005 12:06 PM
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Regarding   http://www.seasonal-charts.com/index.htm

Heating Oil looks like another excellent counter-cyclical position.
(See http://www.seasonal-charts.com/beitexte/demos/start1.htm )

From July 1 thru Oct 31 Heating Oil increased roughly 11% during 
those 4 months on average, which is +37% annualized.

From Nov 1 thru Jun 30 Heating Oil declined by roughly 7% during 
those 8 months on average, which is -11% annualized.


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Author: Zeelotes Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172243 of 253834
Subject: Re: Sell in May or Rotate Sectors? Date: 5/7/2005 9:31 PM
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Fred Wrote:
Another approach might be to buy gold or gold miniing stocks starting in May.

Here you are for gold:
            Symbol                 AVG   StdDev   % POS   P   N   High     Low    UP  DOWN  FLAT   %
All
WG580 Metals-Gold 3.81% 12.41 68.75% 11 5 29.47% -13.87% 7 4 5 44%
Year One WG580 Metals-Gold 7.93% 7.46 100.00% 4 0 19.03% 2.96% 3 0 1 75%
Year Two WG580 Metals-Gold -1.34% 14.66 50.00% 2 2 18.37% -12.53% 1 2 1 25%
Year Three WG580 Metals-Gold 13.90% 12.25 100.00% 4 0 29.47% 2.89% 3 0 1 75%
Year Four WG580 Metals-Gold -5.23% 6.89 25.00% 1 3 2.33% -13.87% 0 2 2 0%

Between a 3% gain and 3% loss is considered flat in this analysis. Has worked well for year one and year three, but not years two and four.

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