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'Sell in May and go away'. Is it applicable in the Philippines?

richpulubi · 26 · 6731

richpulubi

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There is a saying in the stock market in the US wherein you 'sell in May and go away'.  Meaning, you sell and take profits in May, and wait until I think November before buying again.  Values will be on a downward trend in the past few weeks and the next few months daw.  I think it is when the market is weakest in the US, considering it is the start of summer ata, and business slows down.

Because of globalization, how will this affect our market?  Will we also have a slow down, or will money flow to here, since foreign money will look to the Phil for more appreciation than the US?

Are the months of may, june, july, and august slow months for equities in the rp?

Thanks in advance guys!


TSO

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Let's take a look at the PSE all-share index, shall we?

These are all beginning-of-month values, by the way

Nov 2010: 2760.02
Aug 2010: 2197.91
May 2010: 2038.57

Nov 2009: 1826.80
Aug 2009: 1786.06
May 2009: 1422.83

Nov 2008: 1313.46
Aug 2008: 1623.74
May 2008: 1723.94

Nov 2007: 2340.33
Aug 2007: 2163.03
May 2007: 2081.70

So... what does the data say? :D


bauer

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there is an average upside of 25% come november?..... excluding 2008 data of course


TSO

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Yeah...

But then, if you look at August -- the midpoint between May and November -- it actually went UP on all but 2008 (which was when the financial crisis struck the Asia-Pacific region, if I recall correctly).

^^


richpulubi

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Cool!  I guess, it is good to buy...if history is a guide!

Post Merge: 1306130483
And yes, the crisis bottomed out at Sept. 2008.
« Last Edit: May 23, 2011, 02:01 PM by richpulubi »


bauer

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the data of the composite index is good BUT careful with the stock picks.  Most stocks does not move in the same direction as the composite index taken on an individual selection basis unless you will 'mimic' the stock composition of PSE index


ahock

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may data ba na 3 months before ng may para malaman natin if may sell off pag may sa Pinas?


rds

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meron ba talagang pattern ng sell-off???

may nagsasabi na october daw! yung panick selling kasi ay nangyayari ng biglaan at kusa, depende sa mode ng traders. kasi kung may pattern, say october, then lahat ng money managers, traders and analyst will sell their stocks on september pa lang di ba? then next year august pa lang...na break na yung pattern.

the only sure thing is that bear market will come at hindi namimili ng buwan.


TSO

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Do you guys really want me to provide the month-end data for the Phil. all-share index?

Technically, I could give all the data of years 2006 to 2010 for your review, but that's a lot of work, even for me. Work better spent on analyzing companies.

I'm not even interested in the sell-off to begin with, because, as far as I saw, the All-Share index curve just keeps going up from May to Nov. Besides, you should be more interested on periods before the quarterlies or annuals are publicly disclosed, as that's usually when stocks go up or down.

The marketplace, after all, is about perception of value, and nothing says more about value than "increased earnings".
« Last Edit: May 24, 2011, 11:59 PM by TSO »


DonT

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arnel

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@TSO, that would be great sir! At least somehow we will have an idea which month is the best time to buy - applicable I guess for thos who wants to buy in the long term like me,,,


TSO

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@TSO, that would be great sir! At least somehow we will have an idea which month is the best time to buy - applicable I guess for thos who wants to buy in the long term like me,,,

Okay, bud, here. I logged on COL and keyed in closing values for the All-Share Index from 2000 to May 2011.

In those 136 months, 48 of them were negatives, representing 35% of the sample population. The average level of decline for the falls in a given year ranged from 0.25% to 6%, with significant levels of variation.

Empirical laws of statistics state that 68% of all declines should fall between 1% and 5% losses.

Now, a majority of these declines are concentrated on the months of August (7 out of 11), February (6 out of 12), September (5 out of 11), and December (5 out of 11). May, June, and July fell simply at the average number of declines per month over the past 136 months. Gains are normally produced in January, April, October, and November.

Median for declines in August was 2.42%, 4.59% in February, 3.13% in September (there were two outliers of 21% and 15%, resulting from macroeconomic forces beyond the scope of reasonable predictability), and 2.58% in December. These values fall within the aforementioned range of 1% to 5%.

Before you even think this means that companies get cheaper during those four months (Feb, Aug, Sep, Dec), be warned that the stock market has been rising at an 11Y CAGR of 15.26%, with May 2011 4.77x higher than what it was on May 2000. The financial crisis of 2008, which caused the market to contract from 1668.75 on July-end to 1194.84 on Dec-end (a 28% fall!) was still 1.44x higher than prices on December 2000 and was actually comparable to prices seen on 2004.

To further accentuate that companies can actually get more expensive despite the declines, let's compare August close versus May close.

2000   12.21%
2001   3.78%
2002   -16.71%
2003   12.05%
2004   4.20%
2005   0.01%
2006   0.77%
2007   -3.46%
2008   3.22%
2009   16.73%
2010   9.32%

ON AVERAGE, the market is 3.8% higher on August compared to May. The same thing occurs if you use September instead, coming up with a median of 8%. Obviously there is no point to timing the market over the long run.

If there's one thing we could all learn from this, well, it's the notion that all purchases on the months of February, August, September, and December should be done on month-end.

By the way...

Quote
the data of the composite index is good BUT careful with the stock picks.  Most stocks does not move in the same direction as the composite index taken on an individual selection basis unless you will 'mimic' the stock composition of PSE index

Agree completely.



Post Merge: 1306300680
Oh and yes, here is the raw data:

   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011
January   667.48   816.56   727.05   627.98   937.92   1158.49   1308.87   2012.55   1921.16   1194.84   1885.49   3033.13
February   586.5   781.61   744.67   638.86   941.58   1197.86   1300.04   1983.3   1827.11   1211.02   1928.34   2853.74
March   625.93   716.7   746.58   650.09   936.1   1186.96   1344.97   2046.76   1715.57   1283.9   1979.42   3005.85
April   628.4   727.22   746.92   672.77   971.24   1137.27   1408.43   2078.72   1741.79   1359.78   2043.97   3057.64
May   620.71   747.12   757.58   685.42   969.47   1174.54   1434.77   2222.59   1571.68   1567.87   2065.03   2960.45
June   655.65   781.16   700.78   730.29   1013.22   1173.99   1369.89   2361.15   1619.43   1566.47   2145.51   
July   629.75   810.58   646.64   769.2   1006.83   1201.32   1471.44   2268.96   1668.75   1768.16   2182.79   
August   696.5   775.39   630.98   768.04   1010.2   1174.65   1445.81   2145.62   1622.25   1830.18   2257.48   
September   682.96   656.31   611.22   791.49   1092.63   1182.49   1552.59   2226.71   1272.57   1787.09   2575.38   
October   701.01   643.01   612.94   839.31   1134.11   1191.02   1664.01   2340.33   1242.08   1828.37   2725.89   
November   708.75   700.92   642.84   836.35   1164.25   1271.35   1744.28   2216.75   1196.99   1891.51   2742.53   
December   829.93   682.87   608.78   874.78   1154.39   1273.14   1860.34   1973.96   1194.84   1918.64   3006.42   
« Last Edit: May 25, 2011, 01:29 PM by TSO »


rds

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@ TSO,

just want to clarify, kasi mukhang hindi tumutugma yung data mo sa pagkakaintindi ko sa data ng FMIC.

iba ba yung "All Share Index" sa "PSEI Stock Index"?

kasi PSE Index ngayun ay umaabot na sa ~4,200, while your data is only ~3,000.



TSO

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Yep.

PSEi only tracks a certain number of companies. The all-share ibdex LITERALLY tracks all companies within the Phil market.

The code for the all-share index is PASHR. i chose this since we're talking about the market as a whole.


bauer

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to make the comparison meaningful & relevant, use the ALL STOCK INDEX data and not the PSE index data because the stock composition CHANGES from time to time unlike the ALL STOCK.


 


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