Just a quick year end update on the UK Market timing indicators & the performance of the Compound Income Scores Portfolio (CISP). As I'm sure you are all aware it was a fairly benign year for investors despite all the political shenanigans in the UK and the various arguments about how bad or good the dreaded BREXIT is going to be, if indeed BREXIT does ever mean BREXIT. Consequently, unlike Mrs. May, UK equities proved to be quite stable despite this background and continued their bull run as project fear's worst nightmares failed to materialize. Indeed they ended the year in a strong fashion with unusually the FTSE 100 leading the way with a 5% total return. I say unusually, as for the rest of the year returns generally increased as you went down the size scale. For example for the full year FTSE returned just over 13% while the Fledgling Small Cap Index offered twice as much with total returns of over 26%, while the larger Mid & Small Cap Indices returned around 18% for the year.
Thus for Private Investors and others not tied to the indices by their jobs, it was a fruitful year for stock pickers who could dip in and out of or invest heavily into the smaller parts of the market more easily - if the returns of some of the Twitterati are anything to go by. I do however wonder if this might be the last hurrah of an elongated bull market and suspect that 2018 may be a lot tougher at some point. The market timing indicators do not however suggest that we should worry about that just yet, as given the strong end to the year, all the UK indices remain about 5% above their respective moving averages and the economic indicators that I analyse along side these are also still positive. So although there are always bearish voices out there, it seems we should continue to ignore them for now and continue to enjoy the ride.
So onto the CISP and its returns for the month of December which were +5.5%, unsurprisingly positive again given the above market background. This compared to 4% from the FTSE All Share. This meant a total return of 39.4% for the year which was 26.3% ahead of the total return from the FTSE All Share, but also the Mid Cap, Small Cap & AIM indices which it has about 75% exposure to. Since inception of this portfolio in April 2015 it is now up by 68.8% which equates to an annualised return of 25.3%, albeit that this has been achieved in a very favourable market background. Thus as I say it was a fruitful year for those able to invest heavily in the smaller & perhaps under researched parts of the market. I think this may become more of a feature in the year ahead with the MIFID directives meaning that there is likely to be less research available on smaller Companies.
Talking of research - I wouldn't worry too much about MIFID & lack of research though as from experience I know much of it was just marketing material and analysts were usually hopeless as forecasting and most of their recommendations were either Buy or Hold and hardly ever Sell as they didn't want to upset the Companies & or their clients. Having said that there are now some wonderful resources out there for Private Investors with the likes of Stockopedia and Sharepad etc. plus the availability of RNS's and other relevant news at the click of a mouse. Personally I'll be using the Compound Income Scores, together with Stockopedia Stock Ranks more in the future to manage my portfolios as I firmly believe that these models can be a great help in identifying shares that outperform, as demonstrated by various portfolios based on them for example. If you are not familiar with the Compound Income Scores you can read more about the background to them and how to get access to them if you want by clicking here.
Finally, as we approach the New Year I resolve to try and do better on my Blog next year as I know I rather lost interest in it this year as I found it was not a good use of my time, especially when people were spending such a short period of time actually reading it! So may I wish you all a Happy New Year (if you have read this far) and good luck with sticking to your resolutions and with your investing in the year ahead.