Just a quick update on the performance of the Compound Income Scores Portfolio (CISP). After such a promising start it was a fairly disappointing month in the end. FTSE 100 and the broader FTSE All Share Index both ended the month with total returns of nearly -2%, while the Mid 250 stocks did slightly worse with -2.24%. As is often the way at the start of a sell off (if that's what this is) the Fledgling & Small Cap Indices held up better with Small Caps flat and Fledgling stocks actually delivering positive returns of 1.83%. The more general weakness seems to have been led by nervousness about rising bond yields on the back of the gradual withdrawal of Central Bank Quantitative Easing or QE being therefore replaced by Quantitative Tightening or QT.
So onto the CISP and its returns for the month of January were similarly drab but were at least just about positive at +0.06%. This compared to the 1.93% loss from the FTSE All Share giving 2% of out performance on the month. 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. Within the portfolio it was pleasing to see one of last months new purchases - Miton Group (MGR) - coming in as the top performer with a near 20% rise, while Hays Group and Bodycote delivered 11.5% and 6.6% respectively on the back of their updates. On the downside the laggards were Games Workshop (-10%), Jupiter Fund Management (-6.1%) & Bellway (-4.3%) which all probably succumbed to profit taking after previous strong performance.
Personally since I'm be using the Compound Income Scores, together with Stockopedia Stock Ranks more this year to manage my portfolios I was also able to benefit from the rise in Miton Group too. I firmly believe that these quant models can be a great help in identifying shares that outperform, as demonstrated by CISP and other portfolios based on ranking sytems. If you are not familiar with the Compound Income Scores (which have been updated for subscribers today) you can read more about the background to them and how to get access to them if you want by clicking here.
Finally we have the US Unemployment data with the non-farm payrolls today. These should still be fine, while the main FTSE Indices all still remain about 2.2 to 2.4% above their moving averages, with the Small Cap index is nearly 4% above. So these still suggest that we should not be that worried about the sell off just yet, although I guess it could develop into something nasty given valuations and the levels of complacency that have built up over the last few years on the back of QE which meant that corrections were few and far between recently.
A surprisingly busy even manic Monday today, or maybe even Blue Monday as I see #bluemonday is trending on twitter today.
As far as the Compound Income Scores portfolio (CISP) goes we have had positive US tax related update from Bodycote (BOY) where they say it will add 5p or around 10% to this years earnings thanks to a one-off revaluation of US net deferred tax liabilities. In addition they said that Q4 trading had been strong & therefore the Board now expects full year 2017 headline operating profit to be towards the upper end of market expectations (company compiled analysts' estimates range: £117 million - £126 million). So continued good momentum in the business and the shares here, although this has left it looking poor on the value front as it approaches the upper end of my normal comfort range at around 20x with a circa 2% yield.
Also on the US tax cut front Ferguson (FERG) outlined the effects of this and the reduced tax charge they will have going forward. They didn't give explicit guidance as to the effects but I would expect we will see upgrades here too. This should help to continue their strong momentum where the price has broken out to new highs. While they are good quality and offer slightly better value than Bodycote.
Away from US related tax changes we had an operational update from Central Asia Metals (CAML) which saw production towards the top end of their expectations. For the coming year they affirmed expectations of similar production levels at this stage and confirmed that as of 31 December 2017, CAML had cash in the bank of $46 million.
Finally XL Media (XLM) announced the acquisition of a number of leading Finnish gambling related informational websites from Good Game Ltd for a total cash consideration of up to €15 million. The Acquisition is expected to complete during the first quarter of 2018 and to be immediately earnings enhancing in the current financial year following completion. Seems fine and a continuation of their acquisition strategy, although on this occasion it is not diversifying but bulking up their original core operations.
That's it for the CISP today so I'll leave you with some music appropriate to today's title to choose from and cheer you up if you need it or not as the case may be. Happy Investing & listening.