The Ultimate “Sell in May” Sector

  • SumoMe

Summer time is a great time to build a house, do some remodeling or engage in some other home related improvements.  It’s just not a great time to invest in the stocks related to any of this.

First off, let’s make an important point: I am NOT “predicting” that housing stocks etc. are “at the edge of the precipice”, “set up for a crash”, “doomed to failure”, or any such thing.  I am simply stating that the time to hold housing related stocks is from November through May and NOT from June through October.

Let’s examine the cold, hard facts.

(See also Shining Speculation Example in Gold Stocks)

Ticker FSHOX

Ticker FSHOX is the Fidelity Select Construction and Housing Portfolio sector fund.  Let’s compare the November through May performance to the June through October performance since inception in 1986.

First note this “statistically significant” difference:

*Between November and May FSHOX has gained +7,488%

*Between June and October FSHOX has lost -61%

Need I say more?  Well just to cover all the bases let’s take a closer look at some of the numbers “behind the curtain.”

0Figure 1 – FSHOX: November thru May Bull Period versus June thru October Bear Period

As you can see in Figure 1:

*The November-May bull period has seen FSHOX register a gain 90% of the time (as of 5/12/17 the current bull period – which is not included in Figure 1 shows FSHOX up +18%)

*The June-October bear period has seen FSHOX register a gain only 50% of the time

*The average November-May performance = +16.2%

*The average June-October performance = +0.1%

*Do NOT think that FSHOX cannot rise between May and November. FSHOX gained +24.3% in 2003, +18.6% in 2012 and +16.6% in 1993 during the so-called “bear period”.  But also note the losses of -32.4% in 1987, -31.3% in 2008, -29.7% in 1990 and -21.0% in 2002.

*On the other hand the worst losses experienced during the November-May bull period was -5.7% in 2008 and -4.7% in 2000.

The equity curves make the performance differences quite clear.  Figure 2 displays the growth of $1,000 invested in FSHOX only during the months of November through May starting in 1986.1Figure 2 – Growth of $1,000 invested in ticker FSHOX November through May (1986-present)

Figure 3 displays the growth of $1,000 invested in FSHOX only during the months of June through October.2Figure 3 – Growth of $1,000 invested in ticker FSHOX June through October (1986-present)

See also This is What a Lack of Fear Looks Like (I Think))

Summary

So are housing related stocks guaranteed to fall – or even underperform – between 5/31/2017 and 10/31/2017?  Not at all.  Simply note that history suggests that this may not be the best place to be during that time.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

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