Winter Portfolio: Our stocks keep outperforming
There's a seasonal trading strategy that typically generates far better returns than if you had stayed invested all year round. Over the past decade, it has outperformed the FTSE 350 index by at least five-fold. And it's incredibly simple, too, giving investors both a specific entry and exit date. Now five months into this six-month trade, there's plenty of reason to be optimistic.
Buy on the first trading day of November and sell on 30 April suggests the strategy. It's based on the theory that far more money flows into equity markets during the winter months than in the quieter summer period when thoughts turn away from investing and to holidays and the sporting calendar.
We teamed up with Harriman House, publisher of The UK Stock Market Almanac, and fine-tuned the data to generate even bigger potential profits. First, we took the companies which had delivered the most positive annual returns over the past 10 years to form our Consistent Winter Portfolio. It has generated an average annual return of 26% over the past decade. Our Aggressive Winter Portfolio is more flexible on track record, but the extra risk is rewarded with potentially higher returns - an average of 37%.
Here's a round-up of the highlights and lowlights from the fifth month of this six-month strategy.
Round-up
A 200-point trading range during March made for an interesting month. After an inauspicious start, the FTSE 350 kicked into gear and made a record high three weeks in. A sharp sell-off as the month drew to a close meant the FTSE 350 benchmark ended the month 2.3% lower, yet our Consistent Winter Portfolio fared better than the 350 and our higher-risk Aggressive Winter Portfolio was more-or-less on a par.
Expectations that the Federal Reserve will now not raise interest rates until later in the year excited global stockmarkets. There was a brief wave of optimism, too, following the chancellor's final budget of the parliament. Stockmarkets hit record highs briefly until rate concerns resurfaced and a Saudi-led coalition bombed anti-government forces in Yemen.
Miners were hard hit in March, while the standout performers included current City favourite ITV (ITV) and Standard Chartered (STAN). Investors in the Asia-focused bank are excited about incoming chief executive, ex-JP Morgan man Bill Winters, who replaces Peter Sands. There's talk he might up sticks and shift the bank's HQ to the Far East, saving hundreds of millions in tax.
Consistent Winter Portfolio
The Consistent Winter Portfolio notched up a double-digit rally in February, so a 1.5% slip in March is nothing to be ashamed of, especially when the FTSE 350 fell 2.3%. That's why a 6.7% five-month gain for our portfolio beats the benchmark, up just 5.9%.
Speciality chemicals star Croda (CRDA) traded flat in March and portfolio dog, oil services struggler Hunting, rose 2.5%. Elsewhere, things were more mixed.
Ashtead (AHT) has proved a volatile performer over the five months and remains ahead over the period despite a disappointing reaction to strong third-quarter results early March. Broker Jefferies remains upbeat. "With continued Sunbelt market share gain, Ashtead remains in early innings of multi-year period of supernormal growth," it says.
Workspace provider Regus (RGU) has had a great run and, even after falling 8% in March, is up over 10% for the five months. Fund manager Henderson (HGG) jumped another 7.5% and is easily the star stock here, up a third since October.
Aggressive Winter Portfolio
Our Aggressive Winter Portfolio has rarely lagged the benchmark, and nothing changed in March. A 2.6% decline for the portfolio was only a fraction worse than the FTSE 350, and a 9% five-month gain is an impressive 50% better than the index.
The monthly performance is all the more impressive given both Ashtead and Regus fell sharply. No longer underpinned by bid speculation, online gaming group Bwin.Party Digital Entertainment (BPTY) dropped 6%, too. Full-year results were mediocre and insufficient to offset impatient bid speculators - revenue fell to ?611.9 million from ?652.4 million and underlying cash profit sank to ?101.2 million.
Thankfully, Taylor Wimpey (TW.) racked up further gains of 7%, driven largely by results from peers which reflected well on the house-building industry. Internet gambling technology firm Playtech (PTEC) rose 1.4%, too, continuing its recovery since a sell-off in November.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
