Bes Stocks To Buy 2014, Best Stocks For 2014: Time to dump your holdings, pack your bags and head for the beach?

Sunday, January 1, 2012

Time to dump your holdings, pack your bags and head for the beach?

“Sell in May and go away” is one of the most widely touted Wall Street adages. It’s based on historical data going back decades that show summer and early fall to be the worst time of year for stocks, while the biggest stock market gains are made from November through April.

But does it really make sense to dump all of your holdings, pack your bags and head for the beach? Or, in the midst of this powerful bull market, is sell in May one of those investment strategies that’s just plain silly (and possibly lazy)?

We asked some of our experts to weigh in on whether they thought it would be wise for you to sell in May, or if they could offer some better investment strategies for the months ahead.

Presidential Cycle Trumps Sell in May

Expert: Louis Navellier, Editor, Blue Chip Growth

Investment Strategy: Growth stock investing focused on fundamentals

His take: They say “sell in May” because huge inflows of cash from pension funding comes in November and April. This pumps money into the market and creates the biggest surge for the indexes, but when May rolls around, the inflows decrease. If you only invest in index funds, selling in May might be your best bet. But if you buy individual stocks and want to make money in 2011, don’t take your money off the table this summer.

We’re in the third year of a presidential cycle, and every such year of this cycle has been up since 1955. The second and third quarters have proven to provide some of the biggest gains of the year, and this is why you really shouldn’t sell this summer.

Now, I expect that the market will get more selective post-May, but that actually works in your favor, because the big money will be chasing fewer stocks, and the profit opportunity will be amplified. Where’s the money going to go? Right into companies with strong earnings and solid fundamentals. ! Look for companies with strong sales, earnings and margin growth, because this it where the rally will be while the junk will be left in the dust.

Market Timing Doesn’t Work

Expert: Dan Wiener, Editor, The Independent Adviser for Vanguard Investors

Investment Strategy: Winning strategies for Vanguard investors

His take: What’s missed in all this “sell in May” stuff is the fact that, outside of an IRA or other tax-deferred account, you pay taxes on any gains you may have accrued, which cuts into your returns dramatically.

Market timing doesn’t work, and there are plenty of examples when sell in May was wrong. Had you sold in May 2009, for instance, you’d still be waiting for the market to dip lower — and you would have missed out on months of positive gains that summer. Of course, certain defensive sectors tend to do well in the period, such as health care. But rather than make a market-timing bet, why not just make it a long-term part of your portfolio? You’ll sleep easier, and you won’t have to guess when to get back in.

Clean Up But Don’t Cash Out

Expert: Richard Band, Editor, Profitable Investing

Investment Strategy: Conservative investing for income and low-risk growth

His take: Like many catchy Wall Street slogans, “sell in May and go away” contains a kernel of truth. Yes, the stock market tends to generate smaller returns from May to October than in the other six months. Does it follow, though, that you should sell every stock and mutual fund you own on May 1, and buy them all back on Oct. 31? In many years, you would end up buying back at a higher price than you sold for. And, unless you confined yourself to no-load mutual fu! nds insi de a retirement account, you would, over time, heap up a king’s ransom in brokerage commissions and capital gains taxes.

The better strategy? Comb through your stock portfolio at least three or four times a year (April is as good a season as any), and clean out your marginal holdings — those that, in your judgment, have exhausted their near-term potential. Feed any free cash back into the market on the next 3%-5% pullback in the blue-chip indexes. Except in major downturns, it doesn’t make sense to cling to large cash balances. Resort to cash only if you can’t find enough stocks you trust for the long run.

Cash is Trash; Buy Global Stocks

Expert: Robert Hsu, Editor, China Strategy

Investment Strategy: Global stocks traded on U.S. exchanges (ADRs)

His take: I’m expecting to see a continuation and likely upward expansion of the trading range that we’ve seen throughout the spring in domestic markets, with emerging markets outperforming. This is a continuation and confirmation of my discussion that “cash is trash” right now, and that investors are moving in a big way to equities and hard assets.

The real engine of the world’s economy is in the emerging markets of Asia, driven by China. This is emphasized by the recent IMF report that expects for the “Age of America” to end, with China overtaking the United States in real terms as early as 2016.

For U.S. investors, it will be increasingly important to invest in strong global companies benefiting from the growth in emerging economies through both the summer and full-year 2011. Overall, I expect a relatively strong double-digit year for both domestic and global equities, with the outperformance coming from and driven by emerging markets during the second half. Sell in May and miss out on all the gains? I don’t think so.

Lagging Sectors Should Shi! ne

< p>Expert: Nancy Zambell, Editor, Buried Treasures Under $10

Investment Strategy: Undiscovered stocks priced under $10 per share

Her take: At every little blip in the markets, the doomsayers have been crying foul, but they’ve been wrong. The Dow has risen 10% so far this year, while the S&P 500 is up 8.7%, and the Nasdaq, 8.3%, with gains across a broad spectrum of sectors. Now, “sell in May and go away” is their new mantra. And I think they are still wrong; I’m looking for good performance in May, but more narrowly dispersed among sectors that have not yet had their day in the sun.

In 2011, energy and industrials have been the biggest winners so far. But health care, materials and consumer discretionary have not been far behind. It should be no surprise, as these are the sectors that most often lead during a period of economic recovery.

This march forward has been fantastic. Nevertheless, we’ve come far and fast, so I would not be surprised if the best-performing sectors did take a rest (not a decline) in May — albeit temporarily. That will give rise to opportunities in sectors that haven’t yet had a chance to shine, including regional banking and technology. And I also wouldn’t rule out selected names in health care. In short, don’t sell in May — just invest your new monies in a different way!

There’s More Money to Be Made

Expert: Hilary Kramer, Editor, GameChangers

Investment Strategy: Investing in the companies that are revolutionizing the way we live

Her take: Should you sell in May and go away? Absolutely not. Should you think about taking some profits if you’ve been fully invested? Absolutely.

I remain bullish on the market — to be honest, more than I thought I might be at this point. Liquidity from the Fed, low interest rates, strong earnings a! nd relat ively tame inflation are a powerful combination. I’m watching to see when some or all of these factors will come to an end, but that end doesn’t appear to be in sight quite yet. If you “go away,” you’ll almost certainly miss out on more gains.

At the same time, whenever you get a run like we’ve had — the S&P 500 is up nearly 30% from October through April — taking some profits and lightening up here and there is just smart investing. And, as we all know, the market is more volatile than it used to be. All it can take is one headline to bring stocks down.

So be smart about banking some of your profits. At the same time, please don’t go away. There’s more money to be made. Just be selective in the stocks you own. Look for companies that can continue to grow if (or when) some of the current positives turn negative — after all, this has been a supported rally — or companies with specific catalysts in place to drive them higher no matter what happens in the market.

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