‘Sell in May and go away. Come back on St Leger’s Day’. So goes the old adage and it is obviously one to ponder as we enter the month of June.
The phrase comes from an era when the City was full of toffs who spent the summer months on the social circuit of Epsom Derby, Royal Ascot, Wimbledon, Henley Royal Regatta, Glorious Goodwood and Cowes week, ending with the St Leger, the oldest and final horse racing classic of the flat season.
There is no doubt that there is still a bit of a lull on stockmarkets over the summer, but statistics from Datastream would indicate that in most years, selling in May would be a bad move.
This year too, it would mean missing out on new fund launches from two of the most successful names in the industry.
The first comes from Neil Woodford who is probably the UK's best-known fund manager. Having left Invesco Perpetual, where he had great success, he is launching his new fund, CF Woodford Equity Income. His long-term investment approach remains the same, focusing on valuation and identifying companies that he believes can deliver sustainable dividend growth.
Equity Income funds can always be a useful part of an investment portfolio, and so this could be worthy of consideration. However, given that Neil Woodford often takes contrarian positions, you would need to take a long-term view on the holding.
The second launch this month is being made by Terry Smith, who manages the successful Fundsmith Equity fund. The new fund is called Fundsmith Emerging Equities Trust or Feet. Like Neil Woodford, Terry Smith has an excellent record, albeit over a shorter period. His Fundsmith Equity Fund is one of the top performers in its global equity sector, having delivered a return of 67 per cent since it was launched three and a half years ago.
The new fund will replicate the existing fund's approach of buying shares in companies with strong defences against competitors and he likes firms that sell branded consumer goods. However, it will focus on shares listed in emerging markets. Emerging markets look good value after the falls in recent years, so it could be seen as a good time for a launch.
Terry Smith also likes to run concentrated portfolios and so the fund will have only 25 stocks, which he believes provides him with enough diversity, concentrating on ‘the world’s greatest companies.’ Mr Smith said his new fund was likely to have more exposure to Indi many emerging market funds.
So a little more for you to ponder, as you head off to the Derby or to Wimbledon for your strawberries and cream!