After Red October we have had something of a Black & Red November in so far as there was Black Friday & the Compound Income Scores Portfolio (CISP) ended in the black too. While the red came from the FTSE All Share which ended November in the red and the Monthly timing indicators which remain in negative territory too. Please see the Portfolio Menu at the top of the site or in the three bar menu if you are on a mobile device & want to see the full table of returns or other summary details about the portfolio.
In terms of this months screening for the CISP it was another mixed bag as three potential sale candidates came up as their scores had slipped below the 75 level that I use for reviewing holdings. I decided to retain two of these as their scores were only slightly below 75. One of these was again Alliance Pharma (APH) which I have already given one stay of execution to, but given the volatile markets I would expect it to be a bit more defensive from here. The other was Bloomsbury Publishing (BMY) which is a classic dividend growth stock & has the stronger second half trading period to come so here I was also reluctant to ditch it on limited news flow. The one I did choose sell was Ferrexpo (FXPO) which apart form appearing to be very cheap, I don't feel that strongly about. It could well suffer badly if we see an economic downturn (which may be what the rating is discounting) plus the portfolio retains a holding in Rio and therefore some exposure to the sector. Given the way economies are shaping up it doesn't seem like a bad time to be reducing this type of exposure.
To replace this I selected a different type of miner that scores highly, in this case a data miner as it were called D4T4 Solutions (D4T4). This £74m market cap. company seems to be a play on internet / big data type of thing and as such may be interesting after all the GDPR stuff earlier this year. Indeed their recent interim results were exceptionally strong, although this was to some extent offsetting a big drop off in business that they saw last year. So it may just be a lumpy type of business or perhaps this could be the start of a more rapid growth phase given the actions they have taken since last year.
If they can repeat the strong growth in h2 then I suspect there could be bigger upgrades down the line, but as ever time will tell on that. Nevertheless they look quite good value on around 15 to 16x predicated on a strong bounce back from last years fall in earnings. The yield is lower than I would normally look for at 1.5% or so, but otherwise it seemed like the most attractive addition to the portfolio which brings something different to the party.
It does also seem to have momentum as it is threatening to break above recent highs and maybe could even go onto hit all time highs around 280p that it set around the year 2000 if the second half proves as strong as the first half, or not as the case may be! Any way I guess it will not be every ones cup of tea and I'm not sure I can bring myself to buy it personally, so we'll have to see how it goes for the CISP.
"Indeed despite all the positive economic news out of the US, the markets are starting to feel a bit nervous again as bond yields head upwards and as we head into October which is often a dangerous month to invest."