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What are we looking for?

Companies that historically contradict the traditional "sell in May and go away" investor adage and are exhibiting strong earnings momentum heading into the summer months.

The screen

The "sell in May" saying is shorthand, of course, for equity holders to sell their positions in May ahead of historically low returns throughout the summer months. Looking at historical S&P 500 returns from 1965 to 2014 in Thomson Reuters Eikon, the effect of this axiom can be seen with index returns averaging only 0.1 per cent from May to September while returning an average of 7.9 per cent from October to April.

Digging deeper into these returns, over the past 20 years, the health-care sector managed to return an average of 3.3 per cent over the May to September time period, the highest of any sector.

This screen will take a look at North American equity securities in the health-care sector that are in the 95th percentile of the Thomson Reuters Price Momentum Model, and are trading at least 5 per cent higher than their respective 50-day simple moving averages. This proprietary quantitative model weights the industry, short-, mid- and long-term momentum components of individual companies and ranks them among their regional peers.

More about Thomson Reuters

Thomson Reuters delivers trusted news and intelligent information to more than one billion people in 140 countries every day. Our content, software and technology support the way professionals work in a rapidly changing, ever more complex world. Thomson Reuters Eikon is the platform used by financial and corporate clients to access top research, portfolio analytics, charting and screening for every asset class.

What did we find?

The screen yielded 16 results that are positioned to deliver based on strong price momentum. Eagle Pharmaceuticals Inc. has shown exceptional price performance since the announcement of a licensing agreement with Teva Pharmaceutical Industries Ltd. in mid-February of this year pertaining to one of Eagle's leading injectable products.

Looking north of the border, Nobilis Health Corp. has seen strong price appreciation since the acquisition of Athas Health LLC in November, 2014, and management has given guidance on a 145-per-cent increase in revenues for 2015.

This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.

Ryan Gottschalk is an asset management specialist at Thomson Reuters.

North American health care stocks