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The old stock market adage runs, “sell in May and go away”. The thinking was that UK shares generally did little over the long lazy summer, so investors could just sell up beforehand, forget about the market and come back refreshed in the autumn, ready to invest.
There is mixed evidence about how successful that strategy that has been over the long term. One risk with being out of the market for long periods of time is that seriously good stock market returns are often driven by a fairly small number of strong days in the market.
Miss them and the results could be far worse. It can be tempting to try and time the market, but in reality nobody knows what will happen tomorrow, let alone further into the future.
I may sell this May – but I also plan to buy
So, what am I doing?
In short, I am ignoring the blanket approach suggested by the old proverb.
I may indeed sell some UK shares this month (and in other months), if I feel less confident about their investment case relative to their valuation than I did before.
But I also expect to put some spare cash to work in the market this May as I think a lot of UK shares currently trade for what seem like potentially bargain prices, from a long-term perspective.
One share I recently bought
As an example, consider Burberry (LSE: BRBY).
The UK fashion firm has had a choppy couple of years. I bought the stock last year and later sold for a tidy profit. But after that, its price kept rising.
Fast forward to a few months ago and the share entered a steep decline. From the first week of February to the second week of April it lost 49%. Since then it has risen 19%, though has a long way still to go simply to get back to where it stood three months ago.
That sudden plunge did not come from out of nowhere. A weak economic outlook could hurt demand for pricey luxury items. While higher-end luxury houses like Hermès may weather that storm better, Burberry often finds itself in a middle zone: its customer base may splash the cash when times are good, but they are more price-sensitive than customers of some costlier rivals.
Add tariff uncertainty into the mix and it is easy to see why the City soured on the raincoat maker. But I saw a buying opportunity and added the share back into my portfolio.
After all, while there may be more short-term price gyrations to come, over the long run I am upbeat about the prospects for the company. It has a unique brand and positioning, large customer base and extensive global reach. Being in the middle ground when it comes to pricing can be a liability in a weak economy, but it could also help Burberry recover faster than rivals once the economy starts to pick up again.
This May, I will be scouring the market for other great UK shares with attractive prices too.
