There is an adage in the financial world, “sell in May and go away”, based on a theory that stocks underperform during a six-month period from May to October. While we do not know what will happen in the upcoming months, European and American equities posted gains last month.
The EURO STOXX 50 and S&P 500 increased by 1.63% and 0.55%, respectively, and on May 7th, the S&P 500 hit an all-time closing high of 4,232.60. From the beginning of the year to the end of May, the EURO STOXX 50 increased by 13.70%, whereas the S&P 500 gained 11.93%. This is the first time that the EURO STOXX 50 has outperformed the S&P 500 in the first five months since 2017.
In this article, we share the stocks that made an appearance on our map for the first time and the ones that saw the biggest price movements.
Newcomers on the map
While we see some companies on the map month after month, two companies made their map debut, both of which are American companies:
AMC Entertainment Holdings
AMC, the world’s largest movie theater chain, was the most popular stock among our investors in May, being the most traded stock in 10 of our 18 countries, and it made our map for the first time.
AMC has made headlines this year, becoming one of the so-called meme stocks after getting the attention of retail investors on Reddit forums. Similar to GameStop, retail investors since January have been banding together to drive the price of AMC up, despite the company’s fundamentals, in hopes of igniting a short squeeze.
A short squeeze primarily negatively affects short sellers, which are investors who have sold shares without actually owning them. These investors believe that stock prices will decrease and hope to buy back at a lower price, making the difference in profit. When prices sharply increase due to news or any other reason, a large volume of short-sellers buys back the stock to minimise losses, pushing the price of the stock up even more. Essentially, the short-sellers are ‘squeezed’ out of their positions. Artificially inflating stock prices does not reflect the true value of AMC, which has struggled amid the Covid-19 pandemic with movie theaters being closed for months.
On May 6th, AMC published its first-quarter earnings, reporting a loss of $567.2 million, more than what analysts had expected. Despite this, prices surged during the month, ending May up by 160.42%. One day that stood out, in particular, was May 27th. On this day, AMC’s stock price jumped by 35.58%, and it had the highest trading volume of any stock on the US exchanges.
Marathon Digital Holdings
Marathon was also a map newcomer and was traded the most among our Danish investors. It is a mid-cap digital asset technology company and is involved in mining cryptocurrencies, such a Bitcoin.
The company released its first-quarter earnings on May 10th, reporting a 1,454% year-over-year increase of total revenue to $9.2 million. Marathon noted that this was primarily due to gains made from a $150 million Bitcoin investment made in January. Although the company had strong earnings, stock prices ended May down by 32.65%.
Crypto-linked stocks, such as bitcoin miners like Marathon, are correlated to Bitcoin and other cryptocurrency prices, which are highly volatile. Last month, Tesla CEO Elon Musk announced that it would suspend vehicle purchases using Bitcoin due to environmental concerns. Around the same time, China reiterated its intent to crack down on cryptocurrency mining. As a result, crypto prices tumbled.
Out of the stocks on the map, AMC’s 160.42% increase made it May’s winner. This year so far, prices are up by a whopping 1,132.08%.
On the losing end was IT repair services company Solutions 30, with prices decreasing by 53.02%. On May 10th, the company asked Euronext Paris to suspend trading in its shares until further notice. The company released its 2020 annual report on May 23rd without its auditors, Ernst & Young (EY), signing off. EY stated that it did not have enough evidence for certain transactions to do so.
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The information in this article is not written for advisory purposes, nor does it intend to recommend any investments. Please be aware that facts may have changed since the article was originally written. Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products that match your knowledge and experience.
Sources: Bloomberg, Reuters, Motley Fool, Business Insider, Financial Times, Nasdaq, AMC, Marathon