The corny title refers to one of my long standing holdings which has delivered excellent returns for me over the years. As I have written before it is one of those family run businesses which Lord Lee is fond of backing and indeed I think he has been in this one in the past. Any way I digress, but the stock concerned is S & U Plc which is now a £240 million market cap. car loan company which also has a fledgling bridging loan operation. So why mention it today? Well they have their AGM today and have put out a trading update statement ahead of that.

This confirmed continued strong trading despite what the share price might have been suggesting. If that is of interest you can read the announcement and learn more about S&U at their investor relations website. Here you'll also find links to some Proactive Investor Interviews with Anthony Coombs, chairman of S & U. I thought the last one, which you can view here if your want, was interesting as he seemed to be pretty confident about on going growth as they only take a small proportion of all the loans they are offered by their panel.

Cutting to the chase I think the shares look good value down here on around 10x this years forecast earnings with a 5% yield based on both of these growing in double digits, which seem likely given the latest update and the Chairman's confident comments in the interview after the finals in April.

Looking at the chart you are would not getting in at the top if you were to buy in now as the they have come back from over £25 to their current £20 or so.  Looking at the chart below I have drawn on the trading range and what is called a triangle formation by connecting the highs in the recent downtrend and it looks like it might break out of this triangle one way or the other fairly soon. The theory is I believe that it should then move by around the height of the triangle which in this case is roughly 500p. So that would suggest targets on a decisive break, of either £15 or £25 which would be around the old highs which could then act as resistance.

My money is obviously on a breakout to the upside and having top sliced some of mine near the £25 high in 2015, I have been buying some back around the £20 levels recently. As ever you pay your money and take your choice. In the meantime I'll continue to enjoy the 5% yield including the 39p final worth 1.95% which is due to go XD on 15th June.

As some of you may know the former (?) Tory Chancellor was / may be Philip Hammond who was also known as spreadsheet Phil as he apparently has a fondness for spreadsheets. Now regular readers will know that I have a fondness for generating income from my investments and compounding the returns. Now while I try to do this as much as possible in tax free wrappers which are generously provided by the government. Outside of those one is potentially liable for income and capital gains tax on assets held outside of these tax free wrappers.

Now until recently, income on UK Shares benefited from something called the tax credit, which basically accounted for basic rate tax and one therefore only had to pay tax on income if your income in total, after taking account of the personal allowance, exceeded the higher rate threshold. That tax credit was abolished by the previous Chancellor George Osborne, who at the time he introduced a 7.5% basic tax rate on dividends rising to 32.5% and 38.1% for higher rate and additional rate tax payers and also introduced a £5,000 dividend allowance to make up for this loss of the tax credit. This however failed to fully make up for the loss of the tax credit as this change was one of the biggest revenue raisers in his budget at that time. Since then Philip Hammond decided that this allowance was too generous and proposed to cut it to £2,000, although I note that the legislation required to get this change into law was not passed before the election. I have however seen comments to suggest that this will be forthcoming post the election, assuming the Tories are returned.

As the legislation is likely to be passed (as discussed above) the allowances and tax rates for the current tax year are as follows:

                                            Income                                           Capital
Tax Free Allowance  £5,000 (going to £2,000)        £11,300
Basic Rate                            7.5%                                             10% (18% on residential property - why?)
Higher Rate                        32.5%                                           20% (28% on residential property)
Additional Rate                38.1%                                          20% (28% on residential property)

My question to Philip Hammond, or whoever is the next Chancellor, is why is investment income on shares treated & taxed differently and unfavourably compared with Capital Gains on share investments?

Supplementary question - I presume the higher capital gains tax on residential property is designed to discourage buy to let landlords? This has in fact encouraged some to register as a business instead, but that's another story.

So in conclusion my suggestion would be why not align these allowances and rates for the sake of simplicity and for equal treatment of capital & income? Now in my mind that would mean giving a £11,300 dividend income (& maybe include residential property income within this) and align the tax rates at 10% & 20%. This might go some way to replacing the loss of the tax credit & greatly simplify the current messy system they have introduced. No doubt they won't like that as it will probably cost them money. Alternatively I guess there would be a risk they could bring the Capital Gains Tax allowance down to the level of the income allowance to raise more money perhaps? Therefore not sure I'll send this idea to Spreadsheet Phil, strong and stable Theresa or my local Tory MP.

Summary  +19.13% Year to date, +32.6% 1 Year & +44.2% over 2 years or 19.4% annualized.

Regular readers may recall that I am referring to the Compound Income Scores and the associated portfolio which has now been running for just over two years. For those newer readers who are perhaps unfamiliar with the Scores - these are designed as a way of quickly identifying UK listed equities which are:

Good value, with robust operating characteristics and a yield that is well covered, which has been growing consistently and is forecast to grow in the current year with those forecasts ideally supported by positive estimate revisions. If you want more details about them then please either click the highlighted link above or use the Scores tab in the navigation section at the top of the site.

Now while two years is not a long enough track record to draw firm conclusions, it does at least so far seem to suggest that they have been working well in identifying attractive shares that have characteristics that can lead to good returns, as shown in the graph above. This shows the total return on the CIS Portfolio which has been selected from top decile ranking stocks on the scores. During the first year from April 2015 it followed a quarterly screening process & we also ran an unchanged portfolio for a year by way of comparison, which in the end delivered similar results in the first year. In the second year just finished it moved to a monthly screening process and over the second year this monthly screened portfolio pulled well ahead of the annually re-balanced version. This was probably because the monthly screening enabled it to benefit from opportunities thrown up by the BREXIT vote and it has therefore seen a strong recovery from the BREXIT induced sell off in June 2016.

In 2017 the portfolio has been on a very strong winning streak outperforming the broader market by more than 2% each month in the first quarter. Q2 has got off to an even stronger start with the portfolio being up by 5.78% in a market that was down by 0.37% for an outperformance of 6.15% on the month. This was led by 9 holdings that soared by 9% or more in the month as seems to have been the patterns across the market more generally. Against that there were only 6 stocks which fell by 1% or more. This leaves the portfolio up +19.13% in 2017 to date which compares with +3.64% for the FTSE All Share for an outperformance of 15.5%.

Since inception just over two years ago the CIS Portfolio is now up by 44.2% versus 15.7% for the FTSE All Share index for outperformance of 28.5% in total in just over two years. This performance equates to an annualized return of 19.39% which is towards the upper end of what I have seen on my own portfolios over the years. So while it is good that the performance from the CIS Portfolio has got off to a strong start, I would add the usual caveats about past performance being no guarantee about the future etc. as pride comes before a fall and all that.

However, in addition to comparing the performance of the CIS Portfolio to the broader UK indices I thought it might be interesting to see how this 44.2% gain over two years compares with those produced by the Income guru screens on Stockopedia as shown in the screen shots below. While the 32.6% gain over one year can be compared with the second image, both of which can be clicked to enlarge. If you can't be bothered or can't read the

figures for some reason then the top performing Guru screens on Stockopedia by comparison have done +34.5% over two years and +31.3% over one year. So it seems that the CIS Portfolio has managed to beat all these Guru screens over the both one and two years since it was set up. It is also worth noting that this has been achieved with a full portfolio of 20 to 24 stocks over this period, whereas some of the Stockopedia Guru screens sometimes only have a few qualifiers with some of those being overseas based. So may not be an ideal comparison, but interesting nevertheless.

While comparing this performance to the UK Equity Income Sector in the UK on Trustnet.
I see that the top performers were: +27% over two years, 31.4% over one year, and 14.7% year to date. So it is pleasing to know that by taking an independent, unconstrained approach the CIS Portfolio has been able to achieve better results than both the Guru screens on Stockopedia & all the available UK Equity Income funds too.

Thanks for reading & don't forget if you would like to harness the power of the Compound Income Scores in constructing your own portfolio then click here to read more about them and how you could gain access to them.