Cape Town - Sell in May and go away has never gained any real academic backing and I would caution investors in taking this strategy too seriously, says Overberg Asset Management analyst Kirk Swart.
This week's share watch focuses on the "sell in May" phenomenon and some worthy local newsmakers.
1. Steinhoff [JSE:SHF]
Steinhoff is forever looking to increase their foothold in Europe. Of late, Steinhoff has locked horns with the UK retailer Sainsbury over Argos and is busy fighting the French retailer Fnac over Darty. Argos is a catalogue retailer and Darty a French electrical retailer.
In September 2015, Fnac proposed an all share offer for Darty at 101 pence per share. Since the offer, Fnac and Steinhoff have traded blows with Steinhoff’s latest offer at 160 pence per share. The last offer by Fnac was 153 pence per share. Before Fnac's initial interest in Darty, the company was trading at 65.5 pence per share.
For Argos, Steinhoff challenged Sainsbury with an all cash offer but was beaten by Sainsbury and had to withdraw.
With Steinhoff`s listing in Europe, we can expect more of such acquisition offers in the future.
2. Taste Holdings [JSE:TAS]
Starbucks South Africa opened their first store on Thursday last week in Rosebank. Taste Holdings are introducing Starbucks to South Africa, where the coffee market and coffee culture is growing rapidly.
The South African coffee market is already familiar with brands such as Vida e Caffè, Truth, Seattle etc. Taste Holdings aim to roll out between 12 and 15 stores in the next two years. We will wait to see whether the Starbucks brand, which is famous all around the world, will find acceptance with the South African coffee market.
South Africans generally prefer their coffee roasters to be non–commercial, with that personal touch.
3. DBX US
The Deutsche Bank passive US tracker tracks the US MSCI Index. The tracker has exposure to top listed US shares such as Apple, Microsoft, Johnson & Johnson etc. The tracker can be bought on the JSE under the code DBXUS. What is so attractive about this exchange traded fund is that it is a low cost way to get exposure to the US market without having to use your foreign allowances. Another attractive aspect is that it is a pure rand hedge investment.
The JSE all share is looking expensive again with a price earnings ratio of 22. The DBXUS tracker offers more value and gives local investors diversification benefits. For the last three years it has given investors a return of 32% per annum.
4. Clicks [JSE:CLS]
Clicks are continuing to grow market share despite the challenges the economy faces. The group reported a strong set of results for the six months that ended February 2016. Group revenue increased by 13.4% and diluted HEPS grew at 15.1%. Although the results are strong, trading at a PE of 24, the share is not cheap. Management expects the trading conditions to remain tough despite Clicks spending R455m in 2016 on the roll-out of new stores.
5. 'Sell in May and go away'
Although this is technically not a share it has relevance to the share market. “Sell in May and go away” is an old phrase used by investors that infers that investors should sell shares in the month of May to avoid the seasonal decline from May to October and only get back to buying shares in November.
The strategy is based on the historical underperformance of world share markets for the mentioned period.
Sell in May and go away has never gained any real academic backing and I would caution investors in taking this strategy too seriously.
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* Kirk Swart is an analyst at Overberg Asset Management, an Authorised Financial Services Provider (No 783) which specialises in the private management of local and global discretionary portfolios as well as pension products.
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