Stock investment: Old favorites are new favorites

Und again is September. Once again, the racing season for three-year-old thoroughbred horses in Great Britain has come to an end. A very important date for the stock market, because now it is time to buy shares again – until next May.

“Sell in May and go away / come back on St. Leger’s day” is the motto that historically symbolizes that the wealthy British elite of the 19th and early 20th centuries left London and the stock exchange for the duration of the racing season. The starting signal for this is traditionally at the beginning of May with the “2000 Guineas” race in Newmarket near Cambridge. The season ends with the St Leger Stakes in Doncaster, which this time took place on September 12th.

FAZ.NET has been monitoring the development of share prices between St. Leger’s Day and the 2000 Guineas for several years. And in the process, some stocks emerged that have always been among the winners since 2004/2005.

Record share of winners

After the corona pandemic in the previous year ensured that the field of winning shares was significantly smaller, the balance sheet is correspondingly better this time. From the St. Legers race in 2020 to the 2000 Guineas in 2021, 52 percent of the shares showed a positive performance – a new record since 2004.

The ten-year balance has also improved. 123 shares and thus around 60 percent more than a year ago would have in the past ten years – if they had been bought after the St. Legers race and sold before the “2000 Guineas” – each time brought a positive return. That is less than 1 percent, an exclusive group, the number of which fluctuates greatly: in 2017/2018 it had 42 members, in 2018/19 there were 210.

After the corona pandemic thinned out the list of the “eternal best” last year, it has remained constant this time. Furthermore, it is the same five actors that also this time brought a positive total return: two from China, one from Italy and two from Germany. In addition to the reinsurer Munich Re, this is undaunted by the manufacturer of personnel management software, Atoss.

This increased its turnover last year by 20 percent to the still modest amount of 86 million euros. However, it has also been growing for 16 years and margins reached a record level again in 2020. The first half of the year also went very well. The company has been paying increasing dividends every year since 2003, with a generous special distribution every three years. The current rate of return is not high at less than 1 percent. Overall, however, the small company is apparently so attractive that it has a market capitalization of almost 1.5 billion euros, which would be almost enough for the M-Dax. The major shareholder is the founding family Obereder, with a stake of slightly more than 51 percent, which has reduced its stake a little since 2020.

In addition to Atoss and Munich Re among the top five, the Italian energy supplier Terna, the Taiwanese semiconductor company Taiwan Semiconductor among the chosen ones and the Chinese internet holding company Tencent. However, this is precisely what you have to worry about. Since the beginning of May, the price has fallen by 25 percent due to the tough crackdown by the Chinese leadership against the country’s Internet companies. Good for those who had heeded the “Sell in May” here.

Anyone who bought shares in these five companies for the first time in September 2004 for EUR 1,000 each, parted ways with them in May and reinvested the proceeds in the same stocks in September, would have been able to look at a portfolio of almost EUR 220,000 as of May 1 of this year . That corresponds to an annual average return of around 25 percent, half of which is due to Atoss and a third to Tencent. If you include fees for buying and selling, you can see the result of the stock market rule “Back and forth empties your pockets” – buying and selling costs around 10 percent of the income.

And not only that: if you had simply kept the shares instead, you would have had a portfolio value of more than one million euros. 85 percent of this is due to Tencent, whose shares were available for a few cents in September 2004, but cost more than 66 euros in May 2021. The “sell-in-May strategy” would only have worked with Munich Re, which would have earned a good 84 percent more. But that in turn only accounts for 5 percent of the portfolio.

Better time than the beginning of the year

But involuntarily one wonders – what is it about the horse races? If you compare the period from the beginning of the year to St. Bernard Day, August 20, which is the same length as the time between the racing seasons, it comes off significantly worse: the 10-year list contains only 77 companies. After all, 16 overlap with the “horse racing list” – only the five best that have always been there are not included. Apparently the seasonality is different. And the period leading up to St. Bernard’s Day only knows one long-term winner: Church & Dwight, an American manufacturer of household goods such as toothpaste and cleaning agents. The share has outperformed the total return of an investment in the S&P 500 index since 2001 by almost ten percentage points on an annual average, but has recently performed rather poorly. Does it all say a lot about the period between horse races? Rather not.

There were also high chances of increasing stock market profits in horse races for the British upper class at the St. Leger Stakes last Saturday. Anyone who had bet on a victory by the outsider “Fernando Vichi” could have won up to 50 times their stake, depending on the bookmaker. Could have, because the gallop didn’t quite come out of the box and ended up seventh. Instead, the favorite “Hurrican Lane” prevailed. There was then only 80 pence for every pound wagered.

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