A couple of decades ago, I uncovered a strategy that completely changed my life.
It changed the way I look at the markets and analyze stocks.
It was an eye-opening moment that improved my returns and removed all of the guesswork from investing.
This strategy is so powerful that, to this day, every company I recommend to subscribers is filtered through this lens.
And I tell every investor who asks me what the best trading or investment strategy is to do the same.
A Strategy for All Seasons
Seasonal trading has long been brushed aside as “random” or a market anomaly.
Mainstream financial talking heads and columnists love to try to poke holes in our strategies and ideas.
They do this despite decades and decades of research and real-world work by guys like Yale Hirsch, Jeffrey Hirsch, Norman Fosback, Dick Stoken, Peter Eliades, Jay Kaeppel, me and others.
Personally, I feel that we’ve collectively more than proven that our various approaches are viable, time and time again.
But it never seems to be enough.
As Kaeppel wrote, “If 100-plus years of strong performance are not enough to convince you that a given method or trend is viable, then you are awfully tough to please.”
Unfortunately, a lot of investors are exactly like that.
Seasonal and trend traders have long been the Rodney Dangerfields of the investing world. (“We don’t get no respect!”) But quite often we outperform the market by a wide margin.
In reality, our economy thrives on consumer spending. And what consumers demand shifts throughout the year.
Bikinis are on sale right now, while winter coats are selling at a premium. That’s not a coincidence – it’s a fact.
And using this truth to our advantage helps us score the biggest gains.
The Strategies You Love to Hate
Over the years, I’ve written that every industry has a season.
At the same time, there are countless articles on the most famous – though most widely misunderstood – seasonal trading strategy: Sell in May and go away.
On the surface, it seems simple enough. And it rhymes – which means it must have some sort of merit, right?
(In fact, the whole adage is “Sell in May and go away, and don’t come back ’til Labor Day.” I mean, that’s poetry.)
But here’s the important question for you: Sell what?
Everything?
Just dump your entire portfolio and sit in cash every May?
That seems like an exceptionally stupid idea and awfully damaging to your financial future. And any person who blindly promotes the “sell in May” strategy is unintentionally doing more harm to you than good.
In reality, the “sell in May” strategy applies to only a handful of specific sectors… not the entire universe of stocks or mutual funds.
But its catchiness turned it into an earworm that’s been mindlessly parroted for decades.
More importantly, one of the sectors it applies to is a “Buy” right now!
We’re heading into one of the busiest stretches of the year for seasonal trading. Mainly, we have the holiday shopping season already underway. So this is a particularly important period for retailers.
Well, let’s look at an index of 25 retail stocks that I follow and its October-to-May performance.
Since 2000, holding shares of the Prime System Retail Index from October to May returned an average of 14.76% with a success rate of 76.2%.
Inversely, holding shares of these same companies from May to October had a mere 42.86% success rate with a negative return.
This is why they fall into the “sell in May” strategy.
But you’ll also notice that the down years in the chart were financial collapses, like from October 2019 to May 2020.
But the bounce-back years are extraordinary. In fact, this index of 25 companies is already up more than 19% since the start of October!
Follow the Money
The success of seasonal trading is built on optimizing time and efforts.
Investors hold shares of companies only during the company’s best periods of the year.
My strategy and investing philosophy are built on a basic premise…
Shares of most companies move asymmetrically.
That means there are blocks of months within a given year when shares will perform well – sometimes even exceptionally well. And there are other months when they won’t.
It’s not random. And it’s not an anomaly.
Because it’s usually the same months each and every year.
And more often than not, that relates back to the company’s underlying business, revenue and earnings.
Most businesses are cyclical or seasonal. And in seasonal trading, all you want to do is focus on these booming quarters and forget the rest.
That’s how we can consistently score big while limiting our downside risk. And it’s why seasonal trading sees so much higher returns than any other strategy.
I’ve been an avid disciple of seasonal trading for nearly my entire career. And I credit all of the portfolio awards, records and recognition I’ve received to this approach.
I believe every investor who applies a seasonal approach to their trading will improve their returns and simply become a better trader.
Here’s to high returns,
Matthew
About Matthew Carr
Matthew Carr is the Chief Trends Strategist of The Oxford Club. His unique take on investing – which involves using a strategic system that chooses companies based on pre-momentum, high growth and discounted prices – has led to countless outsized gains.
Matthew cut his teeth in the industry as a writer for the energy trade publications Natural Gas Week, Gas Market Reconnaissance and Oil Daily. He also dug into exports and international trade finance for Business Credit magazine.
With two decades of financial experience under his belt, Matthew’s expertise ranges from classic industries such as retail and oil and gas to cutting-edge markets like 5G, emerging tech, cybersecurity and cannabis. If it’s moving the markets, you can bet Matthew is there.
