Some investors think they need to bail out in May. But those who stuck around made hay on surprisingly big winners.
Six stocks in the Standard & Poor's 500, including computer graphics company Nvidia (NVDA), energy company Oneok (OKE) and agricultural company Monsanto (MON) shrugged off any concerns about the month and stormed 15% higher in May, according to a USA TODAY analysis of data from S&P Global Market Intelligence. That was an even more impressive gain considering the broad market didn't do all that badly, either, with the S&P 500 itself adding 1.5%.
It was a month of the comeback in tech. Four of the six best stocks of May were all tech stocks, including video-game maker Electronic Arts (EA), computer chip equipment maker Applied Materials (AMAT) and computer chipmaker Micron Technology (MU). The Technology Select Sector SPDR exchange-traded fund (XLK), which tracks tech stocks in the S&P 500, soared 4.9% during May. That gain made tech the best of the 10 sectors during the month.
Some investors are braced for more difficult times ahead for the market in June. But for now, investors are counting their wins. "We remain optimistic toward the broader market and suggest a tactical strategy as we approach a potentially volatile months ahead," says Craig Johnson, managing director at Piper Jaffray.
While tech was the big winner during the month of May, no one got anywhere near the blistering returns of Nvidia. Shares of the company which designs high-performance chips for large workstations as well as smartphones, soared 31.5% during the month to $46.72. The company put up strong 40% adjusted profit growth in the April quarter - and analysts see the growth continuing. Nvidia is expected to earn $2.03 a share in the current fiscal year, up 22% from the previous year, S&P Global says.
Energy's year-long rally cooled a bit in May. The Energy Select Sector SPDR ETF (XLE) slipped 0.4% during the month, a bit of a disappointment since energy stocks are up 11.5% this year so far, second only to utilities. But some individual energy companies still turned in stellar gains, like Tulsa, Okla.-based Oneok, a natural gas exploration company. Shares soared 19.6% during the month to $43.25 each, thanks to firming commodity prices and a 38% jump in first-quarter profit. Analysts think the profit gains can continue, and are calling for 11% adjusted profit growth this year and growth in the following four years.
Mergers and acquisition activity as also a good source for short-term pops in stocks. With companies flush with cash and starving for growth, buyouts could become a more important source of gains. That was the case with the 20% jump in agricultural and seed products maker Monsanto to $112.47 a share. Rival chemical company Bayer (BAYN) offered $62.3 billion for the company back on May 18.
These outsized gains - and the solid performance of the broad market - show that while adages like "Sell in May and go away" might sound good - they're not always sound advice.
