What are we looking for?
Stocks that have defied one of investing's best-known maxims.
The stock market's typical underperformance in the summer months has resulted in a much-followed investing strategy: "Sell in May and go away."
This seasonal trade has historically proved fairly useful, with the summer proving to be the year's worst months for stock performance. Lately, not so much.
Last year, selling in May turned out to be a pretty bad investment decision. The S&P/TSX composite index rose by 7 per cent between May and October, while the S&P 500 index increased by 10 per cent.
This year, so far, is also bucking the trend. Since the end of April, the S&P/TSX composite index is up, albeit modestly, at 1.5 per cent.
So for investors staying in the market for the summer, we looked for the best-performing Canadian stocks through the early days of the season.
How we did it
We screened stocks listed on the Toronto Stock Exchange for those showing the biggest share price gains since April 30. We limited the search to equities that have risen by at least 10 per cent over a little more than one month.
We wanted to filter out the smaller, more volatile names, so we excluded stocks that had a market capitalization of less than $100-million.
And to help avoid overpriced stocks, we also required a forward price-to-equity ratio of less than 16, the current average on the S&P/TSX composite index.
What we found
A list of 18 Canadian stocks that investors would have been well advised to buy in May.
The stocks span six of the 10 subsectors on the S&P/TSX composite index, with some of the best performing sectors since the end of April well represented, including industrials and consumer discretionary. The inclusion of energy stocks is not much of a surprise given the renewed interest in Canadian oil and gas producers.
As always, these stocks might prove a good starting point, but further research would be required to determine which among them has the momentum required to advance through the rest of the summer.