With at least some traders likely to follow the strategy of ‘selling in May and coming back on St Ledger’s Day’ (mid-September), next month could prove, well, interesting for anyone invested in UK shares.
Personally, I think blindly following an old investing adage and selling everything in the belief that others will follow suit is far from rational for a Fool like me.
Besides, some stocks might do very well over the next few weeks.
Ready to fly?
One example could be holiday firm On the Beach (LSE: OTB). The Manchester-based business drops its latest set of interim numbers on 14 May.
Now, I need to be wary of bias here. I’ve held the stock for a while now in the hope that there would be a sizeable recovery once Covid-19 was sent packing. Unfortunately, I’m still waiting for those significant gains. Still, the stock has climbed 15% in the last year, easily outperforming the major UK indexes.
This doesn’t feel unfair either. The firm experienced its “best ever summer” last year and began its latest financial year with “a record forward order book and significant momentum”.
Since then, a “transformational” partnership with Ryanair has been announced, allowing On the Beach to offer flights by the airline as part of its packages.
Surely things can only get better as we approach the company’s busiest trading period?
Cheap growth stock
Well, ongoing geopolitical jitters aren’t good news for a sector that has faced just about every headwind going in the last few years. But one thing in the £250m-cap’s favour is its asset-light business model. While airlines need to grapple with heavy fixed costs, On the Beach can simply re-allocate its marketing spend to more stable destinations.
The stock also trades at just 10 times forecast earnings. This suggests to me that the price is firmly up to date with events.
So, while buying any stock in the hope that it will rise on release of results is a risky strategy, I’m not about to sell my position either.
Solid performer
Another company that could do well next month is Bloomsbury Publishing (LSE: BMY). It’s set to release numbers for the last full year on 23 May.
Like On the Beach, the company’s share price has been showing some nice momentum in the last 12 months. Indeed, a gain of 23% at the time of writing is evidence that investors don’t necessarily need to back the latest tech darling to outpace the market.
Already priced in?
My one question mark when it comes to Bloomsbury is not the company itself; it’s the current valuation. A price-to-earnings (P/E) ratio of 17 isn’t a bargain relative to other stocks in the Consumer Cyclicals sector or the UK market as a whole. Put another way, the mid-cap can’t afford to disappoint on the day.
Then again, the firm did forecast that annual profit and revenue would be “significantly ahead” of market expectations back in February. If it can continue making a mockery of analysts projections next month, I think there’s a good chance of more upside ahead. With books by fantasy author Sarah J. Mass flying off the shelves in recent months, I don’t think this is necessarily asking too much.
If it is, at least there’s a fully-covered 2.3% dividend yield on offer.
