Stocktake

'Sell in May' effect still in evidence:INVESTORS WHO obeyed the old adage "sell in May and go away" did nicely in 2010 and 2011, when global indices suffered painful corrections, but this phenomenon goes back a lot further.

Between 1950 and 2009, according to the Stock Trader’s Almanac, a $10,000 investment in the Dow Jones compounded to $527,388 between November and April. From May through October, it produced a $474 loss.

One study found that the “sell in May” effect was evident in 36 out of 37 countries analysed, even dating back as far as 1694 in the UK, while it has been particularly evident in Ireland in recent decades.

Bulls will be hoping that this year will be different. For one, the seasonal pattern tends to vary in US presidential election years – stocks typically fall in April and May before bouncing between June and August.

Secondly, they will be hoping that the bulk of the correction has already taken place. Indices in Spain, Italy, France, Russia and Brazil have all suffered double- digit declines in recent months, with most major markets being in corrective mode since mid-March or earlier.

Indices up for 2012 – except in Spain

DESPITE RECENT declines, most indices have gained in 2012. Spain’s Ibex is a notable exception. It has fallen by 17 per cent in 2012 and last week came close to breaking below its March 2009 low – some performance, given that many indices have doubled since then.

Spanish stocks are cheap, but not as cheap as those stats might imply. Rapidly falling earnings estimates mean that the index is trading at a forward price- earnings ratio of 8.7, only slightly below its one-year average of 9.2 and well above its 2008 low of 7.

Spanish valuations are still cheap by international standards, although they are broadly similar to the blue-chip Euro Stoxx 50 index, which may prove to be a less unnerving holding.

Japan tips the other end of the scale

JAPAN’S NIKKEI, on the other hand, may be the most expensive market in the world, according to Bloomberg. It trades on 24.5 times reported earnings, although analysts project that earnings will rise by 69 per cent this year having fallen by a third following last year’s tsunami.

If those forecasts are met, then Japan’s price-earnings ratio will fall to 14.8, a quarter below its six-year average, Bloomberg adds.

Apple defies yet more predictions

MANY FELT that Apple’s pricey products would not catch on in developing countries but soaring Asian sales helped the company trounce analyst estimates last week.

Until December 2009, Apple did not even include Asia-Pacific in its geographic breakdown, so small were its sales. Now, Asia- Pacific revenues – $10.2 billion – topped those recorded in Europe for the first time, and are rapidly catching up on figures for the Americas ($13.2bn).

China contributed $7.9 billion in revenues, with iPhone sales rising fivefold over 12 months. Just two years ago, China accounted for only 2 percent of Apple revenues. Today, it’s almost 20 per cent. The iPad has not yet been shipped to mainland China, so those figures will continue to surge. Sales outside the US now account for 64 per cent of Apple’s revenues.

The Apple stats are remarkable on many other levels.

It has sold 67 million iPads in two years. It took 24 years to sell that many Macs, five years for that many iPods and more than three years for that many iPhones.

Shares moved by $50 on Wednesday, Apple’s biggest-ever dollar advance. That share price gain accounted for over a quarter of the SP 500’s move higher and 59 per cent of the Nasdaq 100’s rise – something unseen in modern times, noted SP index analyst Howard Silverblatt.

Apple’s stock has gained an average of 1 per cent a week for the past nine years.

Apple’s $570 billion market capitalisation is now greater than Microsoft, Google and Intel combined.