Ninety-five years of data show September and October, on average, to be the two worst months of the year. This time around, the scary duo was volatile, providing both tricks and treats, but when all was said and done, the period ended with a slight advance.
Nevertheless, we are pleased that the calendar has hit the Thanksgiving month, and the start of the seasonally favorable six months of the year. Indeed, Halloween to May Day has seen terrific performance, on average, since 1990 and going all the way back to 1929. And Value Stocks historically have asserted their dominance during this span, even as Dividend Payers have lagged Non-Dividend Payers. Happily, despite the war in Ukraine, hostilities in the Middle East, the usual economic worries and questions about potential Federal Reserve action, the latest November-through-April total-return more than lived up to its positive precedent as the Russell 3000 Value index soared 18.37%.
Because the other six months have not performed as well, some might argue to “Sell in May and Go Away,” but the less-favorable period also has been positive on average, with the one just completed seeing the Russell 3000 Value index jumping 10.16% from April 30 to October 31. We also note that while trading commissions generally are now zero, gains generated from short-term trading strategies would be taxed at the higher ordinary income rate, so we think it far better to focus on the long-term prospects of our stocks, rather than the calendar. Still, we don’t mind that the November-to-January period historically has been the most wonderful time of the year!
This month we added to two positions in our newsletter portfolios.
MetLife (MET)
MetLife is one of the largest life insurers, generating the lion’s share of its earnings from its U.S. businesses, which include retirement, group benefits and property and casualty insurance, as well as its international arm. After a strong run over the past year and a half, shares recently fell as MET’s Q3 financial results came in below consensus analyst estimates. Adjusted EPS of $1.95 was 10% shy of expectations and was impacted by lagging performance in Group Benefits and its Asia business, and increased operational expenses. CEO Michel Khalaf commented, “Despite lower variable investment income, MetLife demonstrated the financial attractiveness of our business in the third quarter, including an adjusted return on equity of 14.6%. Our unyielding focus on execution continues to drive strong momentum across our market-leading businesses.” We like the firm’s competitive position within group benefits where new acquisitions will expand market share, and we believe the market has not fully appreciated MET’s improved business mix. MET trades for 8.3 times NTM adjusted EPS and yields 2.8%.
Regency Centers (REG)
Regency Centers is a national owner, operator and developer of neighborhood and community shopping centers. The company has been in business more than 50 years and has a portfolio that is primarily anchored by productive grocers located in affluent and attractive more-populated metro areas. Regency reported solid Q3 results with revenue of $360.3 million (vs. $354.9 million est.) and funds from operations (FFO) of $1.07 (vs. $1.04 est.). Same-property net operating income (excluding terminations) rose 4.4% year over year, with base rents contributing 2.7%. Same-property occupancy of 96.1% was up 80 basis points. Anchor stores saw occupancy up 1% to 97.6%, while small shop occupancy was 93.7%. Management raised full-year FFO guidance to $4.27 to $4.29. Year-to-date, REG has started $200 million of new/redevelopment projects and recently acquired two grocery-anchored shopping centers. We like that Regency is conservatively financed, with a debt load that is spread out through 2049 at a 4.2% average coupon. Analysts expect REG to grow FFO to $4.83 in 2027, adding to the appeal of the 3.8% dividend yield.
This report is an excerpt from The Prudent Speculator investment newsletter, of which I am Editor. For more in-depth analysis and exclusive insights like those shared in this article consider joining The Prudent Speculator here.