Sell ​​everything in May, leave… or not?

By | May 9, 2023

By Demosthenes Tryga

The Greek stock market got off to a very strong start, with the first two months performing one of the highest in the world! In particular, from the lows of September 30, 2022 to the close of February 28, GDT posted gains of over 40%, while since the beginning of the year it posted +21%!

It then scaled back its gains, with the current performance from November 2022 to April 2023 topping out at a not inconsiderable +24%, making it the third-best performance in the last 23 years for that period. At the same time, it is worth noting that the average trading activity seems to be increasing significantly compared to last year, while foreign investors have registered inflows in the first quarter of the year reaching 270 million euros!

The increased commercial activity combined with the inflows of foreign capital are a guarantee for the continuation of the upward movement of the market. However, looking more closely at history, many have come to think of a very old stock market that said “Sell in May and go away, and come back on Saint Leger’s Day” (Translation: Sell in May and go away, and come back back on St. Leger day). For the record, the saying has its roots in Great Britain and was a custom of aristocrats, merchants, and bankers leaving the City of London during the summer months. Saint Leger’s Day refers to a famous horse race that took place in mid-September.

Seasonal anomalies ((Sell in May and Run), January phenomenon, day of the week, etc.) were phenomena that have occurred in the past, but in recent years seem to be out of place. The above saying is the exception, since it applies not only to the American markets (with data from 1945), but also to the AX

In particular, in AA the data I present is only from the last 23 years. Applying the saying and dividing the year into two parts, any investor who liquidates his shares on the last day of April and buys them on November 1 can walk away with a significant profit. It should be noted that in the May-October period there is less marketability and greater volatility compared to the other half of the year.

For the Greek stock market there is one more peculiarity, since in the last 20 years or more anyone who had decided to follow the strategy “buy and hold the shares without buying and selling” until today would have lost about 64.4%, since the trend was clearly downward. That is, if someone had invested 100,000 euros from November 1, 2000 until today, they would have only 35,641 euros (not including dividends). However, if someone had followed the “Sell in May and Go” strategy, their capital would have reached €148,399, a cumulative return of around 48% (not including dividends). In the event that an investor did the opposite, his return would be -81%, that is, worse than holding! The “buy in November and sell in late April” strategy yields an average return for the specific period of +3.8%, while buying in May and selling in October generates an average return of -4.5%.

Looking a little deeper at the data, we see that years where the first four months were bullish (no extremes, like 2020-2021), the market continued to perform just as well into the second period. Thus, 2004-2005, 2006-2007, 2012-2013, 2018-2019 were stock market years where the double-digit returns of the first part also continued in the second part. Clearly, the above data cannot substantiate the statistical analysis, however it is an indication. We will focus on the fact that the worst for the Greek stock market is over, simply “he who burns with porridge burns with yogurt”. The last saying characterizes the investor who has put money into AA for the last 20 years or more.

Banks and constructions protagonists in January in the AA

April ended with gains of 2.9% for GDT, covering part of March’s losses, with 4 months posting gains of around 16.7%. It should be noted that the returns of the main world markets have moved positively in April, and in particular +0.04% for the Nasdaq, +1.5% for the S&P 500, +1.9% for the German DAX index and +1.0% for the Eurostoxx 50

Eight shares of the FTSE Large Cap closed lower, while the rest moved higher. Biohalco (+18%), GEK Terna (+13%) and Coca-Cola HBC (+9%) posted the biggest gains, while Motor Oil (-9%), Helleniq Energy (-5%) and Lamda Development ( – 4%) experienced the greatest losses. In the 4th month, Piraeus Bank (+49%), Aegean Airlines (47%) and Jumbo (+31%) stand out, while on the opposite side are OTE (-9%), EYDAP (-7%) and Helleniq Power (-5%) .

At the index level, commerce (+11.5%) and raw materials (+10.8%) posted the biggest gains, with Fourlis and Viohalco leading the way respectively. On the contrary, the main losses were registered by financial services with -15%, with only two participants, HEXA and MIG, while refineries also registered losses of 7.7%.

Finally, the daily average commercial value of AA in April stood at 78 million euros, reduced both with respect to last April by 8% and with respect to March 2023 by 30%. It is recalled that the average daily transaction value for 2022 closed at 73.6 million euros, while the current average (four-monthly) for 2023 reaches 104 million euros.

S&P 500 earnings estimate ‘blackness’ appears to be ‘greying’

With 53% of S&P 500 companies reporting first-quarter 2023 financial results, 79% posted earnings per share above market estimates, compared to 77% for the 5-year average and 73% the average of 10 years. The truth is that the market estimates had been reduced significantly from the end of the year to the end of the first quarter of 2023. At the same time, 6.9% above the estimates are the earnings per share of the companies that make up the S&P 500. , versus 8.4% for the 5-year average and 6.4% for the 10-year average.

It’s worth noting that earnings per share for the S&P 500 Index after the announcement of 53% of companies and the remaining 47% based on market estimates appears to mark a drop in earnings for the first quarter of 2023 of around – 3.7%, compared to -6.3% last week and a -6.7% decline in earnings as of March 31, 2023, when the fiscal year actually ended. In other words, everything indicates that the outlook seems to be improving as the days go by, since the estimates had become quite “black”.

At the sector level, five (eleven are all sectors) were the sectors that posted earnings above earnings for the last year quarter, led by consumer (discretionary) and industrial goods.

Looking ahead, analysts still expect earnings growth for the second half of 2023. More specifically, for the second quarter of 2023, market estimates call for an earnings decline of -5.0%, while for the third and fourth quarter of 2023 the figures are +1.7% and +8.8%. For the whole of 2023, the estimates speak of an increase in profits of 1.2%.

Finally, the price-earnings ratio (12-month P/E) is 18.1, which is below the 5-year average (18.5) but above the 10-year average (17.3).

Schedule (9/5/2023 – 14/5/2023)

Inflation, MSCI Announcements Thursday

From today Sarantis shares without the right to the 2022 dividend (0.143 euros/share) will be traded on Tuesday, while THA has called an ordinary general meeting. On Wednesday, Alpha Trust Andromeda AEEH is expected to announce financial results for the first quarter of 2023, Intercontinental International AEEAP and B&F have called an extraordinary general meeting, while ELSTAT announces inflation for April as well as industrial production. On Thursday, Titan announces financial results for the first quarter of 2023, while it has also called an ordinary general meeting. and, finally, the THA shares will be traded without the right to the 2022 dividend (1.45 euros/share). On the same day, in the late afternoon, the announcements on the restructuring of the MSCI indexes of the semi-annual review are expected. The potential changes will be implemented on June 1, 2023, while the session prior to implementation sees increased trading activity as index-following investors take their positions in both stocks and weighting changes. The next announcement of the review is scheduled for August 10, 2023. On Friday, ELSTAT announces the granting of vehicle registration licenses for April.

All eyes on US inflation and producer price index

Abroad, today, Tuesday, it is the turn of Airbnb and Under Armor to announce the financial results. April inflation in the US is published on Wednesday, with market estimates of +5.2%, compared to 5% (annual) in the previous month. On the same day, Walt Disney (Dow), ABN Amro Bank, Credit Agricole, EON and Telecom Italia publish financial results for the first quarter of 2023. On Thursday, Britain’s central bank announces interest rates for the pound sterling, with market estimates speaking of 4.5%, against 4.25%. On the same day, in the early afternoon, the producer price index for April is published in the US, with market estimates of 3%, compared to 2.7% (on an annual basis) in the previous month. In terms of financial results, Bayer, Deutsche Telekom, ING Groep, Merck and Telefónica are in order. Britain’s Q1 2023 GDP is announced on Friday, with market estimates speaking at +0.4%, up from +0.6% in the previous quarter. At the same time, Allianz and Societe Generale publish financial results. The week closes with the announcement from the University of Michigan regarding consumer expectations and both short-term and long-term inflation based on May data.

* Demosthenes Trigas is a certified stock and market analyst BETA Securities –

**Republished from the Kefalio newspaper

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