‘Sell in May and don’t come back until St. Leger Day’ is a well-known stock-market saying. In other words, sell shares in May and buy when the St. Leger Day races commence in early September. The reason for the saying is that summer rallies tend to be infrequent and, in fact, history suggests that a summer pullback is not at all uncommon. Indeed, the FTSE 100 is no higher now than it was in May 2014, so those investors who sold up and went away have not missed out on any gains.
However, it’s now early September and, with the FTSE 100 still failing to push past 7,000 points, this could be a great time to buy the following three stocks.
Barclays
Since the start of May, Barclays (LSE: BARC) has seen its share price fall by 11% as investor sentiment has severely weakened. While this week’s news of a £500 million loss on the sale of part of its Spanish operations may seem like yet more bad news, Barclays continues to make good progress with its disposal programme. Certainly, this will cause short-term pain, but may also set the bank up for improved profitability moving forward.
With shares in the bank trading on a price to earnings (P/E) ratio of just 10.3 and Barclays being forecast to increase its bottom line by an impressive 25% next year, the presently low ebb in sentiment could prove to be an ideal buying opportunity.
GlaxoSmithKline
GlaxoSmithKline (LSE: GSK) is also down 11% since the start of May, with shares in the pharmaceutical major continuing to be hit hard by allegations of bribery. Long-term investors, though, should see this as a buying opportunity as opposed to a reason to panic.
GlaxoSmithKline continues to have a hugely impressive and diversified drugs pipeline which, in the long run, should help the company to considerably grow its bottom line. Furthermore, shares in the company are priced to sell, with GlaxoSmithKline trading on a P/E ratio of just 13 and offering a stunning yield of 5.6%. As with Barclays, weak sentiment could equate to a superb buying opportunity.
Vodafone
It’s a similar story with Vodafone (LSE: VOD): you’d have been better off selling at the start of May, since shares in the company have fallen by 8% since then. However, the future could be much brighter than the past for the European-focused operator, with its strategy of buying undervalued Eurozone assets taking time to come good.
However, should it do so, Vodafone could see its bottom line grow at an impressive rate as it has bought high-quality assets at very attractive prices. In addition, shares in Vodafone currently yield 5.5%, which highlights the company’s income potential at a time when low interest rates look set to be the ‘new normal’.