It’s an old adage in the investment world, but “Sell in May and Go Away” has long been a rule of thumb that many traders still adhere to. The idea behind this advice is that stocks are thought to under-perform in the summer months, at least compared to those in the winter season anyway. As such, investors should divest from their positions in May, and only enter the market again after the Fall in November.
However, as most investors know, some rules are made to be broken. While stock market data from between 1950 and 2013 has shown poorer returns for the Dow Jones Industrial Average during that time, this seasonal pattern doesn’t appear to have held up as well the over the last decade. In fact, those still abiding by the rule may have missed out on some big gains.
Because of that, we’re going to shine a light on 3 stocks that have bucked this supposed trend, and take a deeper look at what makes those companies an attractive buy today.
Globant
Software development company Globant is a Buenos Aires-based product engineering and IT consulting business, with expertise in over 30 different portfolio specialties, including newly emerging sectors such as big data and digital currencies, as well as more established operations like workflow analysis and sales and marketing.
Globant (GLOB) has been a high-growth success story these last few years, with its total revenues appreciating at a CAGR of 30.7% since 2014. The company generated top-line income of $1.4 billion in 2021, which represented a year-on-year increase of 59.3%. A big driver of this cash influx has been GLOB’s ability to draw big name companies onto its books, including the likes of Google, Coca-Cola, Santander and Gap.
The firm’s highly differentiated business model helps it stand-out from other larger rivals. Indeed, in addition to its core services, Globant also offers several proprietary tools. One of these, Navigate, helps institutions to “understand, optimize and predict” the processes that affect their operations, while harnessing the power of Artificial Intelligence to better inform decision making.
Ultimately, Globant uses its extensive experience and knowledge base to enable organizations to execute on their digital transformation (DX) strategies. And the DX space is massive: research by the International Data Corp suggests that over $6.8 trillion will be directly spent on DX initiatives between 2020 and 2023.
Given the potential of the wider market at large, it might come as something of a surprise to see that GLOB has performed so poorly when it comes to share price action of late. Its stock fell from $354 in November last year, to just $258 today.
However, a big part of its recent woes was due to a security hack that saw investors leave the stock in droves. And yet, more savvy traders might well see an opening here: in 17 out of every 20 years – or 85% of the time – Globant shares have risen by an average 26% starting in May; and, given its current price discount, this pattern looks likely to continue.
Globant believes it has market opportunities in a wide variety of verticals. It estimates that Artificial Intelligence software will account for $60 billion of revenue worldwide by 2025, and that companies are forecast to double their spend on blockchain technologies this year to the tune of $6.6 billion. If this momentum holds fast – and that May share price rise happens as predicted – GLOB is looking like a very attractive long-term investment at the present time.
Global X Aging Population ETF
So-called pandemic stocks – i.e. those companies that performed well due to the unique market conditions arising out of the health crisis – have suffered mixed fortunes over the previous 12 months. High-tech enterprises like Zoom have been on the decline, with the telecommunications firm losing almost two-thirds of its value since the same time last year.
However, not all businesses have had it so bad. The Global X Aging Population ETF, which seeks to track the Indxx Aging Population Thematic Index, is a fund that – whether through the pharmaceutical and biotechnology industries, medical/nursing services, or old age living facilities – invests in 100 companies that, in one way or another, serve the growing senior demographic.
It has made a mild 3.5% increase in share price over the year, and is still up for the year-to-date 2022 so far.
Interestingly, AGNG is another stock that has a reverse correlation to the “Sell in May and Go Away” seasonal trend. Indeed, the Aging Population ETF has risen, starting in May, an average 8.17% every year it’s been a publicly-traded fund.
Even more interesting is the fact that AGNG is trading considerably lower than its 52-week high of $35.30. The fund’s shares are 18% down from what was also actually the stock’s all-time high price too.
Given that the Global X Aging Population ETF has hitherto locked in an average 8.17% price increase beginning in May, this is another discounted market security that looks a sure-fire bet right now.
STAG Industrial
STAG Industrial is a real estate investment trust (REIT) that focuses on acquiring and leasing industrial properties such as distribution warehouses and manufacturing sites.
The business owns 544 buildings across 50 locations in the United States, with a total of 108.6 million square feet under management. STAG has a market capitalization of $7.58 billion, and an enterprise value of $10.9 billion.
For its fourth quarter 2021 earnings results, STAG reported a consensus beating 13.6% year-on-year increase in revenues totaling $147.62 million. Aided by tailwinds in the growth of the e-commerce sector, the trust’s share price has grown over 22% the last year, as around 40% of STAG’s tenants – and around 90% of its annualized base rental revenue – are involved in the industry through its warehouse and logistics properties.
However, so far in 2022, STAG is down more than 10%. For new investors, though, this is an opportunity: at its current valuation, the trust’s forward yield stands at an enviable 3.46%. Furthermore, STAG’s historical price action demonstrates that 80% of the time, the company’s stock price rises an average of 6.34% beginning in May.
And if the enticement of a high-yielding dividend coupled with a promising price spike in the summer isn’t good enough, there’s always the prospect of a buyout on the cards too. There’s been a glut of industrial REIT takeovers lately, and it’s not wishful thinking that STAG won’t be the next.
For example, LXP Industrial Trust was recently made an offer for a $4.5 billion private deal at a 22% premium over its pre-offer share price, while Monmouth Real Estate closed on its acquisition by Industrial Logistics Properties Trust in 2021 for approximately $4 billion too.
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