No Need To Sell In May Unless You Have To

After such a strong upward push in UK equities of late, it is only a natural question considered by many investors – is it right this year to Sell in May and Go Away?

My view is that unless you need to sell, then perhaps it will be best to ride the machinations of the FTSE100 Index as it gyrates over the next few weeks.

There are, on the face of it, absolutely no reasons to be dumping shares just because of the month of the year.

Sell in May and Go Away, is an adage used by brokers where investors tend to sell stocks in May and re-invest in November.

The phrase’s origin dates back to the 1770s when investors and British officials went on vacation and came back after the St. Legers Stakes horse event.

I quote from Wikipedia –

“Sell in May and go away is an investment strategy for stocks based on a theory that the period from November to April inclusive has significantly stronger stock market growth on average than the other months.

In such strategies, stock holdings are sold or minimised at about the start of May and the proceeds held in cash; stocks are bought again in the autumn.

‘Sell in May’ can be characterised as the belief that it is better to avoid holding stock during the summer period.”

Just because it is an old adage, that does not mean that it is able to predict the future course of the influential FTSE100 Index over the next few months – especially with so many ongoing exterior and global factors.

Again from Wikipedia, I would rather quote FOMO –

“Fear of missing out (FOMO) is the feeling of apprehension that one is either not in the know about or missing out on information, events, experiences, or life decisions that could make one’s life better.

FOMO is also associated with a fear of regret, which may lead to concerns that one might miss an opportunity for social interaction, a novel experience, a memorable event, or participation in a profitable investment.”

That does not mean that one should buy the market, but instead, as ever, be selective, look for growth and value, and then ride your profits.

Card Factory (LON:CARD) – Wishing Them Higher

The UK’s leading greetings cards retailer yesterday issued an excellent set of results for the year to end January 2024.

They showed sales up 10.3% at £510.9m (£463.4m), while its adjusted pre-tax profits were 27.0% ahead at £62.1m (£48.9m), lifting earnings up 11.6% to 13.5p (12.1p) and maintaining its dividend at 4.5p per share.

Impressively, as a result of its cash generation and its working capital management, the group’s net debt was down from £57.2m to just £34.4m.

Trading in the last three months continued the positive momentum across cards, gifts and celebration essentials and was up to expectations, especially with Valentine’s Day and Mother’s Day reporting strong sales.

CEO Darcy Willson-Rymer stated that:

“I am delighted with the progress we have made through the year….Now, three years into our ‘Opening our New Future Strategy’, cardfactory is financially and operationally a much stronger business.

This means that we are able to both reinstate the dividend and invest in the future, while effectively navigating the ongoing economic environment.

We have confidence in our strong value and quality customer proposition and remain on track for both this financial year and for achieving our FY27 targets.”

Analysts who follow the company have an average Price Objective of 147p on the group’s shares, while Liberum Capital have them on a 175p tag.

This time last year they hit 119.80p.

They were up 6.5% in response to the results, closing the day at 109.40p, after having touched 112.26p earlier.

A Strong Hold.

(Profile 05.08.20 @ 42p set a Target Price of 60p*)

Portmeirion Group (LON:PMP) – Operating And Margin Improvements Expected

The end of March saw this ceramics and homeware products group announce a disappointing set of results for the year to end December 2023.

The company, which owns six major brands that are sold into some 80 countries across the world, had been hit for six by tough trading conditions in both its South Korean and its US markets.

Sales were down from £110.8m to £102.7m, with adjusted pre-tax profits of £3.0m (£8.0m), collapsing earnings to 22.4p (46.8p), while slicing its dividend down to 5.50p (15.50p) per share.

Conditions are still challenging but the business should see a steadier year in 2024, before showing a clear recovery in the next year.

The group’s Management has been working upon improving both its productivity and its operating margins.

It has also lined up new product launches in the current year, with customer reactions proving positive.

CEO Mike Raybould has stated that:

“We continue to work on productivity improvements in our factory and together with work done in the last 3 months to reach a much leaner global cost base we have a strong platform to improve operating margins once markets normalise.

We also expect this to help us achieve further reductions in net debt which remains one of our priorities.

We are confident in the strength and resilience of our brands that have over 750 years of combined heritage and continue to grow market share even in the current tough macro-economic environment.

We are pleased with the continued strategic progress we have made and remain confident in our long-term strategy to grow sales and improve operating margins.”

Analyst Sahill Shan at Singer Capital Markets is confident about the group’s mid-term growth but is waiting to see clearer signs of the group’s revenue and margin recovery.

Over at Shore Capital Markets its analysts, Rob Sanders and Bradley Hughes, believe that the Management shorter-term strategy is to return its margins to a 10% EBIT business then up to 12.5%.

Market expectations are for sales this year of around £100m, but with profits improving 50% to £4.5m, lifting earnings to 25p and the dividend to 7.5p per share.

For the coming year to end December 2025 estimates are for £105m sales, £7.0m profits, 39p of earnings and 12p of dividends per share.

Further out some £110m revenues in 2026 could boost profits to £10m, earnings to over 55p enabling a dividend of some 17.5p per share.

The group’s shares, which were 265p before the results, subsequently eased back to 214p at the start of last month.

They have been gradually showing some price recovery to 269.90p on Monday of this week – with the gradual uplift being propped by fairly low dealing volumes.

Hopefully we will get some positive trading signals being outlined when the £36m capitalised group holds its AGM in three weeks’ time.

In the meantime, the shares at last night’s closing price of 262.50p are not looking expensive, while holding substantial upside potential as the recovery takes hold.

(Profile 28.08.20 @ 376p set a Target Price at 480p*)

(Profile 20.10.23 @ 240p set a Target Price at 300p*)

McBride (LON:MCB) – Trading Ahead Of Expectations

The leading European manufacturer and supplier of private label and contract manufactured products for the domestic household and professional cleaning and hygiene markets, yesterday provided a trading update.

The group noted that strong operational performance combined with continued high demand levels for its high-quality private label products saw trading in March and April ahead of expectations.

As a result of continuing strong trading, the group now anticipates that adjusted operating profit will be some 10% ahead of current market expectations.

The group plans to issue its full year trading update to end June 2024 on Tuesday 16^th July.

The company’s shares were up to 123.72p on 8^th April, before dipping to 98.60p seven trading days ago.

They closed last night at 111p, valuing the group at £193.2m.

A good Hold.

(Profile 10.03.21 @ 79.5p set a Target Price of 99.5p*) 

(Profile 17.07.23 @ 31.15p set a Target Price of 38p*) 

(Asterisks * denote that Target Prices have been achieved since Profile publication)