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One favourite axiom of some money managers and investors is, "Sell in May and go away." The rationale behind this is that stock markets generally do not do as well during the spring and summer seasons as they do the rest of the year. While historically that is true, the saying does not hold water.

Selling simply because of seasonality is not wise. While it is great for the enterprises that process the transaction and profit from it, an additional cost burden is passed on to the individual selling. Then if they decide to buy back that position or another with the money, a further commission must be paid. Fortunately, these fees are a fraction of what they were even a decade ago.

It has been documented that actively managing portfolios is for the most part a losers' game. And while buying and holding until perpetuity does not make sense to us either, as at some point virtually every stock will have a big fall, there is a way between these two strategies where better gains will ultimately be achieved. Even the Sage of Omaha, Warren Buffett, sells positions, although some people remain convinced that he buys and holds forever.

Better from our perspective is turning the axiom on its head. We prefer, "Don't buy in May and go away." This also applies through the summer season. Once again, contrarian thought in action.

Of course, this is not perfect, either. Sometimes opportunities arise that cannot be resisted. These are few and far between, though.

One natural advantage that comes out of this approach is that for "marketphiles" such as us, it offers a bit of a breather. Not for one second does it imply we are not monitoring corporate activity. Research remains active. However, dialling back the "buy" impulse does offer the mind somewhat of a respite.

On the other side, this is a great season to sell, if the situation supports it. For example, Benj just sold First Busey Corporation (BUSE – Nasdaq) for $6.49 per share, a company he acquired in late 2012 for $4.26 per share. This was well short of the initial sell target of $9.24.

Why was this action taken? At the enterprise's AGM held on May 20, the company approved a 1-3 stock consolidation. Benj's research indicates that in the vast majority of situations, the stock will be trading at a lesser valuation, sometimes quite a bit lower, in a year's time. Essentially, consolidations are rarely good for investors.

In another deal that was just finalized, Benj tendered his shares of Hartco Inc. (HCI – TSX) and was paid out last week. This corporation was the topic of our article on March 24. He purchased the company in February at $2.69, on the news that the chairman/chief executive officer Harry Hart was offering to buy the enterprise, lock, stock and barrel, at $3.25 per share. After that, Mr. Hart increased the bid to $3.40, which was where the deal closed.

There are other reasons to sell at this time of year. Normally if a stock reaches the initial sell target, some or all of it will be sold. And given the more desultory nature of the stock market during what is often enough the summer doldrums, tax losers will be bid adieu. It makes sense to off them at this time of year, rather than waiting until December when many join the stampede to sell. The supply of shares increases and, as a general rule, people receive less from their transactions. As an aside, that is the time of year when we do most of our buying.

Simply believing in axioms because they exist is foolhardy. An examination of whether they work the vast majority of the time is worthwhile. Sometimes a truth that worked once upon a time ago is no longer valid, and that should be recognized.

So we will stick with "Don't buy in May and go away" – while buying the odd time and selling sometimes. We're disciplined, but not rigid.

Benj Gallander and Ben Stadelmann are co-editors of Contra the Heard Investment Letter.

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