There's an old axiom on Wall Street: sell in May and go away. As with any urban legend or old wives' tales, a hint of truth is prevalent within the assertions. As reported by multiple sources -- most notably the Stock Trader's Almanac -- a seasonality-event typically triggers market weakness in May. Understanding this, savvy investors can get ahead of the trend and sell their holdings before re-engaging the markets at a discount.
Truth be told, there are practical and fundamental limitations to exploiting the May "harbinger." First, there are the unnecessary costs of rotating in and out of stocks, especially if they actually earn a profit or if their seasonal losses are not deep enough in magnitude to offset extra transaction fees. Second, not all stocks react to seasonality trends in the same manner. Some stocks are levered heavily towards industry specific dynamics, while other, more secular names, simply chug along, happy as a clam.
Here are three stocks that beat May's bearish implications and which also appear to have more gas in the tank!
Momentum can strike at any moment. Case in point is IDI, Inc. (NYSEMKT:IDI), which jumped nearly 24% on the final trading session of May. The timing is fortuitous, given the fact that the multimedia and IT solutions provider is scheduled to release its earnings report shortly, between June 4 and June 8. Up until recently known as Tiger Media, Inc., the Chinese-based company's fortune in the markets is no fluke. Since the middle of May, IDI stock has been surging and true to form, capped off the month with a momentous ascent.
Delcath Systems, Inc.
Perhaps no other market sector is as cutthroat and volatile like healthcare. It's a here today, gone today industry where individual fortunes are made or lost on the whims of regulatory approval for therapeutic solutions. Delcath Systems, Inc. (NASDAQ:DCTH), on the other hand, just might have what it takes to be on the winning side of the trade. After years of underperformance, DCTH found its mojo starting in the middle of May, culminating in a dramatic series of trading that saw its stock price move up more than 69% over the course of three days.
It's usually not advisable to buy into a stock after such a heavy-handed move. However, the long-term potential for DCTH is enormous, provided they can keep the momentum going.
Titan Machinery Inc.
Sometimes losing in the markets is winning. Investors of Titan Machinery Inc. (NASDAQ:TITN) found this out on May 29 when the stock jumped 13.50%, a day after the company posted a net loss of $6.2 million in the first quarter of the fiscal year. However, the loss narrowed Wall Street expectations for the agriculture and construction equipment seller, enough so that investors -- under heavy volume -- bought into its potential recovery story. Aside from the enormous leap in valuation, the final trade of May has significant technical implications, beating what could have turned into a bearish head-and-shoulders pattern should investors have failed to convincingly lift the market.
TITN is still a volatile and speculative opportunity; however, the recent trades are convincing enough to warrant a second look.