Here's an old
saying that investors should "Sell in May and go away." While
there's no identifiable rationale to explain why that should be
good advice, there is an element of empirical truth. A study by
PlexusAsset management shows that since 1950 the returns for the
S&P 500 in the months of November through May were 8.1%,
compared with just 2.4% for the period from May through October.
[James Brumley, one of our talented analysts, recently warned
investors about putting too much stock in this, though.
Go here to read his take
The MSCI WorldIndex , a popular
of global stock
performance, shows a similar seasonal pattern. In fact, returns for
the MSCI World Index in the months of May through October over the
same post-1950 era are negative. The old adage to sell in May has
gained even more prominence over the past two years, as stocks have
endured gut-wrenching corrections in the summers of 2010 and 2011,
only to enjoy powerful year-end and New Year rallies.
I'd never recommend managing your portfolio using simplistic
seasonal rules, but it's only prudent for investors to contemplate
the potential for at least a short-term
in global equity markets.
After all, for most global markets, the first quarter of 2012 was
the best first-quarter showing since 1998. And the powerful global
rally in risky assets of all stripes -- stocks, commodities,
corporate and sovereign
-- suggests that the market is pricing in a lot sunnier outlook for
today than it was six months ago.
Stocks certainly seem set up for at least a mild sell-off in May.
newsletter, one of the ways I manage risk in my portfolios is to
own a number of low-beta stocks. In finance, risk is typically
measured using volatility -- the more a stock or
tends to move, the riskier it is to hold. Beta is a measure of
relative volatility, typically using the S&P 500 as a basis for
comparison. It's a simple measure to interpret -- stocks with a
above 1.0 are more volatile than the S&P 500, while those with
a beta below 1.0 are less volatile than the S&P.
While low-beta stocks may not be completely immune from broader
market corrections, many of my low-beta favorites held up well
during last summer's global stock market rout. And thanks to their
payouts, my low-beta holdings
investors some return on their money even if global markets trade
With these points in mind, I scoured global markets looking for
stocks with U.S.-traded ADRs (American depositary receipts) and a
beta relative to the S&P 500 of 0.80 or less. This means the
stocks meeting this screen would need to be roughly 20% less
volatile than the broader average. In addition, I eliminated all
stocks that don't currently offer a
of at least 4% and trade more than 15,000
per day on average in the United States.
The results should give us a list of high-quality international
stocks that easily trade on American exchanges, carry sizable
dividend yields -- and don't gyrate with the wild swings of the
broader stock market. Here's what I found...
Action to Take -->
Many of the stocks in this table combine the safety of a business
like utilities or telecommunications with the high-growth of an
emerging powerhouse like Brazil or China. I think any of the stocks
above could be worth holding through the summer and beyond. In
fact, several of these stocks are already in my
newsletter is devoted exclusively to finding the highest -- and
safest -- yields sourced from foreign companies. To find out more,
visit this link
-- Paul Tracy
Paul Tracy does not personally hold positions in any securities
mentioned in this article. StreetAuthority LLC does not hold
positions in any securities mentioned in this article.
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