Introduction / background comments
Another tricky month for investors as economies Worldwide struggle with the fall out from the Russian invasion of Ukraine in terms of its impact on supply chains and inflation. In addition these macro economic concerns are reinforced by the Geo-political concerns as NATO countries ramp up their military & humanitarian support for Ukraine. This is being done despite the potential of Ukraine & other Eastern European Nations joining NATO having led to the invasion, according to the Russians. As a result they now accuse the West of fighting a Proxy war, although I guess they were damned if they did and damned if they didn't. Hopefully it might come to some peaceful resolution soon, although a long drawn out messy affair or a War of attrition seems more likely at the moment.  Markets continue to struggle against this background and as Central Banks grapple with the now non transitory inflation along with trying again to reduce the stimulus that they have been dishing out to varying degrees since the GFC and more recently during the Pandemic.

As a result Bond yields seem to have finally broken out to the upside to bring to an end (for now) the long bull run they have enjoyed since the early 1980's. I say for now as if these moves lead to an economic slowdown / recession and a market rout then it is always possible that inflation could come down quicker than expected & the tightening might not be as large as currently discounted. Some also worry about deflationary pressures resuming after the current inflation surge is over, although I'm not personally convinced by those arguments at present.

Alternatively, as in the past, Central Banks may again halt their tightening programmes and once again open the liquidity taps again if markets cut up rough and economies seem to be heading for a serious downturn. This might lead to another rally in bonds if inflation is by then showing signs of coming down again and equities might then join in the fun down the line if any or all of that comes to pass.

Of course that could be wishful thinking or it "could be different this time" to coin an expensive phrase - with more persistent inflation and Central Banks therefore having to push on with rate rises and draining liquidity to bring inflation under control despite the damage to economies and stock markets. Or there is an outside chance that they could pull off a dampening of inflation along with achieving a rare soft landing. I won't  believe in either of those until I see them, but as ever time will tell I guess.

For now the sell off in bonds and equities seems likely to continue as investors anticipate further rate rises from Central Banks and are starting to worry about / discount tougher times or a recession ahead. Having said that though some of the economic stats like PMI's and unemployment are still showing positive trends, so a recession is not guaranteed just yet, but it remains to be seen how long that lasts. 

Performance Review
April proved to be another negative month for the Compound Income Scores portfolio (CISP) which was disappointing as the FTSE All Share did manage to eek out a positive return as shown in the table at the start of this piece. Thus for the YTD the CISP is - 9.3% versus the +0.8% for the All Share.

As mentioned last month this is partly down to the make up of the CISP versus the FTSE All Share in terms of exposure to large caps. By way of illustration it just over 60% in FTSE 350 stocks and within that it is skewed towards Mid 250 stocks which have been hit harder than the big FTSE stocks. AIM and small cap holdings have also suffered bigger hits in a reversal of their previous outperformance in recent years. 

There were quite a few names that therefore suffered double digit falls and not enough risers to offset this overall. One of the bigger fallers was Ashtead, which at least was reduced in last months screening, but with the benefit of 20:20 hindsight I obviously wish I'd sold it all. Which brings me on to an update about this months screening

Monthly Screening
There were quite a few names this month which had seen their scores deteriorate sufficiently to be up for consideration for being sold. 6 of these were repeat offenders from last month, including Ashtead again, plus one recent purchase.

In the end I decided to give all of these the benefit of the doubt this month as in some cases the reasons for holding remained the same and in others like Ashtead they seemed very oversold. So I was reluctant to sell them on that basis in the expectation that we might see some mean reversion in the next month, as is often the case after a big move. In addition some of the possible replacement candidates did not look that cheap and on the flip side had pretty strong one month performance. ​Thus having put through quite a bit of turnover the previous month and as it seems hard to add much value from trading currently unless something is obviously at risk. So it seemed prudent to save on turnover in what might have been poorly timed / marginal trades. 

Just a quick note for subscribers, in case you are not aware, brief notes on the Monthly Screening and candidates that are considered on both sides of the ledger are shown in the Journal tab, but these appear below the news flow comments. Since this may not have been obvious, I have therefore moved those this month to the foot of the Transactions sheet where more logically they can then be read in conjunction with the trades actually carried out in the rows above. 

Summary & Conclusion
Another difficult month for investors as bonds and equities continue their sell offs. While for the more general public it is becoming increasingly difficult to make ends meet as inflation continues to soar and as Central Banks tighten monetary policy and look to drain liquidity. 

As a result bonds seem to have ended their long bull run for now and equities have generally entered what would be deemed a correction or even a bear market depending on which index you are looking at. This is on expectations of further action to come from the Central Banks and some rising concerns that this will likely lead to negative economic growth and a potential recession later this year or in 2023. 

Apart from a brief inversion of a yield curve last month as an early indicator other economic indicators such as PMI indices and unemployment data are not signalling trouble ahead just yet and the UK headline indices continue in a bullish trend for now as FTSE 100 stocks have performed well overall this year as Commodity producers have prospered. Outside of that the Mid, Smaller and AIM indices have all slipped into bearish downtrends to the detriment of the CISP as shown in the table at the top. 

Nevertheless I shall be sticking with the process as I believe it remains sound as demonstrated by the longer term track record of nearly 15% per annum compound returns since inception. Overall as I always say you have to take the rough with the smooth in this game and not get too carried away when things are going well nor too depressed when things are tougher. Indeed Ray Dalio of Bridgewater (one of the largest Hedge Funds in the World) said as much when he was reviewing the current state of play recently on Linkedin. 

So mind how you go and I hope markets are not being to cruel to your portfolio & it's not going down like a Led Zeppelin! However you are managing it remember not to get too down if things are tough as that is all part of the investing game and you have to learn to live with Good Times, Bad Times.

Introduction / background comments
Not a great quarter for markets or the World in fact as the terrible Russian invasion of Ukraine is on going. While Covid seems to be doing its best to continue to disrupt things despite many Countries  moving on from restrictions and trying to live with it as a mild endemic kind of thing. Coming out of that on the economic front we are facing inflationary pressures brought about by a hangover from the pandemic, the effects of the Ukraine invasion and in the case of the UK the on going issues arising from BREXIT, if I dare mention that? 

As if that were not enough we also have behind the curve Central Banks trying to play catch up and put the inflation genie back in the lamp even though that is what they wished for. As indicated by Fed Chairman Powell when he updated their policy back in August 2020 when he said they would allow inflation to run hot for some time above their 2% target. Be careful what you wish for as the old saying goes!
 
With Central Banks and the US Fed in particular now ramping up their intention to raise rate we have seen an early inversion of the 2 year to 10 year yield curve there which has historically been a reliable indicator of a forthcoming recession within the next couple of years. There has been quite a bit of debate about the significance of this at present given the Central Banks policy of financial repression by keeping short rates artificially low. 

So there is probably no need to panic about equities on the back of this just yet, but it does suggest that at some point as short rates rise then some problems may arise in the financial system. That in conjunction with the on going squeeze in living standards could then lead to a recession perhaps later this year of in 2023. However for now the economic indicators I follow and the market timing indicators for the main UK equity indices (FTSE 100, 350 & All Share) are still suggesting it is right to stay invested, although Mid Caps and Small Caps remain in a bear trend for now. Of Course you'd have to decide for yourself based on your own risk tolerance etc.

Performance Review
March was at least a positive month for the Compound Income Scores portfolio (CISP) with a +0.4% total return, although this again lagged behind the FTSE All Share which returned +1.3%. Thus in the year to date after declines in January & February the CISP has a -7.5% total return for the YTD versus the +0.5% for the FTSE All Share. See the table & graph at the top of this post which show this & performance together with longer time periods and since inception.

This recent underperformance and indeed some of the outperformance in the longer term is partly explained by the portfolio tilt towards Mid & Small cap names and away from FTSE. More of the FTSE has held up or have even gone up in the recent market conditions marking a rare moment in the sun compared to recent years when investor generally shunned them and chased tech shares in the US and elsewhere. This had left them looking pretty cheap and with a heavy exposure to Commodity names this outperformance may well continue for now. 

I suspect the Mid & Smaller cap parts of the market may, in the main, be more sensitive to an economic pressures brought about by commodity prices and problems brought on by the cost of living squeeze. So I suspect the CISP may continue to struggle against that background, but I will try and address it as far as I can with the forthcoming monthly screenings. 

Monthly Screening
Which brings me onto this months screening which did throw up quite a few names where the Scores had deteriorated enough to make me consider their position in the portfolio. There were 6 of these which I decided to keep as I am happy with their recent updates and fundamentals etc. in the current environment. One of these though, Ashtead (AHT), I did top slice given the lower score,  as it had grown to be the second largest holding, but I will run the rest for now as it seems like a quality compounder.

Aside from that I did process three natural sales based on their Scores and the fundamental outlook. These were Kingfisher (KGF), which I must admit does look fundamentally cheap, although there are question marks about the outlook on the consumer / housing front etc. While the portfolio also has another name which is exposed to some of the same categories in a more limited way, but I'm trying to reduce duplication in the portfolio and increase the diversification by business type too when carrying out transactions, unless there is a strong trend or theme I'm looking to play to a greater extent.

In a similar way the portfolio also said farewell to a more successful position than Kingfisher with the sale of Jarvis Securities (JIM). This had been a beneficiary of the boom in trading during the pandemic, but that seems to have come to an end now. While they may be a beneficiary of rising interest rates, they have seen some big downgrades and the forecast outlook is pretty flat. This one has in the past gone to sleep in price terms & I suspect it could be entering another one of those periods, although it does seem a pretty good business in terms of its financial metrics for the longer term, so I wouldn't put you off holding if you want to. In the context of the CISP this is a another situation where it also holds a similarly exposed business but in this case it is the bigger, better diversified and cheaper IG Group (IGG). So with the waning of the dealing boom by private punters and a more difficult market back ground it seems reasonable to reduce exposure to that theme, but retain IG group which at least seems to benefit from tougher markets.

The final sale was of another seemingly cheap share Barclays (BARC) which has seen its score slip on the back of downgrades post what seemed like ok results. While it may also be a beneficiary of rising rates, it could also be more vulnerable to worsening economic and market conditions. Their case was also not helped by them over issuing a ETN offering which they will now have to pay a large sum of money in compensation. So out it went as it is a bank after all.

Against those sales on the purchase side I did add a couple of financials to replace the two sold which bring in the main a different kind of exposure to markets. One was a strong recent momentum play, while the other was a much smaller more contrarian value type of play. Aside from those I added a well managed, if somewhat boring packaging distributor Macfarlane (MACF) which has traded well and continues to look cheap on the back of some decent upgrades. Aside from those I also reinvested the proceeds of the Ashtead (AHT) top slice into another quality / growth  situation which has de-rated quite a bit along with other higher rated names recently. So now seemed like a reasonable time to bring it up to an average weighting in the portfolio after their recent in line trading update seems to have reassured investors.

Subscribers will be able to see full details of the transactions in their Scores sheets. May I also take this opportunity to welcome all the new subscribers this quarter. If you'd like to join them then you can do so here. 
​
Hopefully the rest of the year might be more productive for the CISP and your investments. So may I wish you well with your investing, mind how you go and don't forget to be careful what you wish for.

Market Background.
Well November turned out to be quite a month to say the least. The fantastic news that a vaccine for the Corona virus had been very effective in tests prompted a record monthly rise in the UK stock market with most of the main indices providing total returns of around 12.6 to 12.7%. While Small caps again led the way following on from them moving above their moving average last month and thereby turning bullish. Thus this month they managed a +15.1% total return.

These moves also prompted a sharp rotation from previous quality / growth / defensive winning names towards low quality / challenged / recovery under performing names in the main, as investors anticipate a quicker return to normal and a more rapid recovery than hoped for in those sectors most afflicted by the virus. Now I'm sure you are familiar with all that by now so I'll move on.

Market Timing Indicators.
Unsurprisingly, after such a large move up in the market in the month, these have all moved above their longer term moving averages. As a result they are giving a positive signal that one should be more positive on and invested in the market. This is backed up by the US Unemployment rate which is used as a back up economic signal to judge whether to pay attention to the signal or not. This has also, somewhat surprisingly, moved down below its moving average, which is bullish, although it remains to be seen if the second wave or the vaccine disrupt or reinforce that trend. 

Within that the main indices are now about 6-7% above their trend which is towards the upper end of where they have got to in the past. While the stronger performing Mid and Smaller Cap indices are 12.3% and 17.6% above their moving averages which is a record amount in the six years or so since I've been compiling these indicators. So that might suggest that the run up in Mid and Small cap names has perhaps gone a bit too far in the short term perhaps? Or maybe they just take a bit of a breather while the larger stocks play catch up, although you would have thought in these circumstances the moves might have been the other way around. In addition in the short term, after such a strong move, it might not be unusual to see some mean reversion on the back of profit taking perhaps.

The swing factor in whether this comes to pass might be the binary BREXIT deal or no deal outcome. Press reports seem to suggest that a deal was possible this week, although it is looking as though that could even extend into next week before a key EU summit on 10th December. My best guess is that a deal will be done at the last possible minute as that is the way the EU seem to operate in negotiations with 11th hours agreements often coming at the last moment. 

Also it is noteworthy that the Portfolio since the March low to the end of November has returned 27.3% while the market has provided a total return of 16%. So on this occasion the Market Timing indicators have failed to add any value and indeed if one had traded out and were now looking to get back in you'd have also have incurred significant fees and spreads too in addition to missing out on the subsequent recovery. Thus this tends to confirm my suspicion that market timing is a bit of a mugs game and that it is generally better to remain invested and benefit from time in the market. Provided of course you can stomach the downs as well as the up and not panic out at the bottom. 

To be fair these type of timing indicators did work well in the 2008/9 GFC as Central Banks were a bit more tardy in responding that time around. On this occasion they were very quick to respond and pump in liquidity which facilitated the turnaround in double quick time. It does of course leave the US market in particular looking particularly extended in terms of its valuation at this early stage of the recovery unless that can surprise dramatically to the upside in terms of its effect on Company profits and earnings. 

On the back of that I'll probably stop writing the timing indicators up on here on a regular basis. I may however keep the data going and mention them if it seems significant in the future in terms of the signal. As a result of that I'll be keeping the Compound Income Portfolio still mostly fully invested going forward from here

Compound Income Portfolio.
It was also a positive month for the portfolio, although sadly not to anywhere near the same extent as the +12.7% total return from the FTSE All Share which I use as a benchmark. Indeed in that context the +6.8%, while great in absolute sense was perhaps, a little disappointing and not even a record, as the Portfolio has done better than that on a monthly basis on a few occasions over the years. 

Nevertheless it is worth seeing that in context as the Portfolio had outperformed the index since the March low by producing +18.6% versus +3.2% for the FTSE All Share to the end of October. Thus the portfolio in November gave back around a bit over a third of its out performance since the low. As a result the Compound Income Portfolio has year to date produced -6.86% versus the -13.17% for the FTSE All Share. Since inception the portfolio has returned +88.51% or 11.84% per annum which compares to +18.22% or 3% per annum from the FTSE All Share. 

Quantitative  Factors & the Growth/ Quality versus v Value debate.
This doesn't come as a surprise to me as the process is designed to identify and target quality growing shares with robust finances and ideally supported by improving prospects in terms of estimate revisions. Whereas the winners as a result of the vaccine news were the precise opposite of that i.e low quality, loss making in some cases and with poor balance sheets that  had been heavily downgraded. Though if users of the Scores were so minded to make that switch they could have identified suitable candidates by just looking in the lower quintile of the Scores rather than the top quintile as usual!

As someone who has managed quantitative driven portfolios both professionally and personally, this move comes as no surprise to me. Indeed at turning points in the market like this quantitative factors tend to stop working for a short period while the buy crap / recovery stocks is going on before the factors that the model taps into reassert themselves in the longer term. 

The monthly screening process does also not lend itself to that and I felt disinclined to throw out the process and charge into recovery plays or skate to where the puck is going to be as one big fan of crap stocks likes to say on Twittter! Sure if you are more of a trader and looking to make rapid short term gains then you will have needed to be buying crap and all those bombed out recovery plays hit by the virus. So congratulation to you if you have managed to do that. Personally as I'm looking to grow and compound my assets and income I still believe that buying and holdings quality stocks for the long run is probably a better way to go in my view, but each to their own.

Now I know that buying quality has become quite a trendy view in recent years after the success of Terry Smith and Nick Train with strategies based on that view. Indeed there has been a bit of a debate before the recent vaccine news about growth versus value and some even declaring the death of value investing as a major value investor threw in the towel and closed their fund in an echo of Tony Dye being sacked PDFM at the height of the dot com bubble. So the vaccine news or V-day was the catalyst for a switch back towards bombed out value stocks as the valuation differentials which had been stretched to the extreme snapped back the other way & previous momentum stocks cratered and previous losers soared. 

How long this goes on for remains to be seen as we work through the second wave and await wider distribution of the vaccines. In the short term, given such a sharp move in the space of a month, as I said earlier, it would not be a total surprise to see mean reversion kicking in to reverse some of this move subject to the BREXIT binary outcome. Ultimately though the recovery in value trend might have a bit further to run for now.

While the Compound Income Portfolio and those type of stock that I target didn't fully participate at least I bought some Temple Bar (TMPL) (which I mentioned on here a few weeks back) for my own more widely diversified portfolio and incredibly have seen it rise by nearly 50%. Which is some small consolation and does help to demonstrate how extreme some to the moves have been in such a short space of time. 

So I guess readers will have to make up their own mind about how they want to play things from here but for what it is worth I share below an interesting video from Terry Smith where he debates quality versus value. Now obviously he is talking his own book but he makes some good points even if he has probably suffered a bit of under performance in the short term since this was filmed as a result of the V for Vaccine rally in value stocks.

Summary & Concluding Thoughts.
So great news for the World that a vaccine has, somewhat surprisingly, been found to be effective in record time compared to the usual 5 to 10 years or never that had been speculated about. This has led onto a record month in stock markets around the World as investors celebrated this and the stocks beaten down as a result of the virus have had a relief recovery as investors moved to discount an economic recovery and an improvement in their prospects.

In the short term this picture is a little complicated by the current second wave restrictions, but in the medium terms is seems reasonable to assume that some sort of normality might be restored by next Spring / Summer & a sharp year on year increase in economic activity should ensue. Obviously the tricky bit will be how quickly this happens and to what extent the economy gets back to some kind of normality or will behaviour be permanently changed?

The UK market seems quite well placed within this current phase as it is heavy in many of the value sectors like Banks, Miners & Oils which are currently recovering strongly. Beyond that it remains to be seen how long that trend continues and at what point the financial and economic effects of the Pandemic start to bear on the market & the economy. Generally it is suggested that when economies get up to 100% debt to GDP which is where we are headed, then economic growth tends to be harder to come by. Think about Japan and what has happened there since their bubble peaked and how they have since struggled to grow despite low interest rates and lots of fiscal stimulus and their equity index remains below where it was in 1989. 

I guess you could say the same about the UK as we have gone 20 years already since the dot com bubble peak in 1999 with the FTSE still below where it was then. So I'd say enjoy the rally while it lasts and hopefully it might have a bit further to go as we are into a traditionally seasonally stronger period. You never know one day this decade maybe FTSE will make it convincingly through 7000!

However as a wise old Stock Broker often said to me "things are never as bad or as good as they seem." So in the same way as I said towards the end of October that you shouldn't get too bearish when FTSE was around 5700. Equally now about 6 weeks on with the market now around 6500 I wouldn't get too carried away. Nevertheless rightly or wrongly I stand by the comment that "in the long run quality dividend paying equities still seem like a decent way to find a growing yield with potential for capital gains in a low yield environment."

So there you go obviously good luck to with your investing and however you choose to go about it and of course it may be possible to get higher returns by trading aggressively and jumping into low quality recovery plays but that's not something I'll be doing for the Compound Income Portfolio. 

All that leaves is for me to wish any readers of this a very Merry Christmas if that proves to be possible at the end of this terrible year and here's to hoping that 2021 is a better one all round.

Introduction
I'll try and keep this brief as there is a lot going on in the world right now & October was, a is often the case, quite a poor one for the market.

Monthly Timing Indicators.
These in the main continue to suggest caution as the generally weak market returns in October kept the headline indices FTSE 350 & FTSE 100 6 to 7% or so below their trends. Somewhat surprisingly given what has been seen on the dividend front in my last post on here, the Mid 250 and Small cap indices fared better. As a result the 250 is only around 1% below its trend, while the Small Cap index has remarkably made it back into positive territory against its moving average trend as it actually saw positive total returns in October. 

Compound Income Portfolio
The Portfolio saw a negative total return of -2.65% in October which was 1.17% better or less bad than the -3.82% from the FTSE All Share. This leaves the portfolio with a -12.76% total return for the year to date compared to -22.98% from the FTSE All Share. If I was still a fund manager I'd be delighted with a 10% out performance, but as a private investor I guess it is bit meh, but not too bad for a fairly low attention mechanical / Quant type approach. The full history and total returns over the last 5 and a half years are available in a table here if that's of any interest to you and these and comparisons with various UK indices are summarised in the graph at the end of this piece after the music playlist.

As for this months Screening there were three natural sells which came up based on their Scores. One of these was a long standing House Builder holding which I let go as it seems to me that the current run in the housing market may not be sustainable. That may of course prove to be too pessimistic if the Stamp Duty holiday and the Help to Buy Scheme should get extended next year like many of the other support schemes at the moment. The other two were at the smaller end of the scale. Despite these looking reasonable quality and being potentially cheap and oversold, they are still suffering from downgrades and an uncertain outlook - so following the process I let them go, although personally I might have been prepared to give them the benefit of the doubt for the longer term. 

Against that I made some purchases of larger businesses in similar related areas of activity to the last two smaller stocks that were sold. While I replaced the house builder (despite my own reservations about miners) with a larger Gold miner which I'd skipped in recent months  as the portfolio already had a smaller Gold miner, but it may now be a time for more exposure to gold perhaps? So I let it be bought this month as it had drifted back with the Gold price in recent months and we are apparently entering a seasonally stronger period for Gold.

Summary & Conclusion
So a difficult month for most UK Indices and the Compound Income Portfolio although it managed to outperform the broader market probably in part thanks to its greater exposure to Mid & Smaller Cap stocks which managed to outperform too. 

The UK Market Timing indicators continue to suggest a cautious approach overall, although Small Caps have turned bullish which may or may not be of any significance to the broader market, but here's to hoping it is. 

Any way as we enter a second lock down in England I'll leave you with some music to be going on with in a Playlist I made up during the last lock down and have add to since - enjoy (?) and I hope that you and your family manage to stay safe and well through what looks like being a tough winter. ​

Introduction.
So we are three quarters of the way through what is turning out to be a terrible year all round, as it has been about six months since the dreaded Covid-19 struck and interrupted and end some lives. We still seem to be living with the consequences and struggling to make sense of it in our every day lives.

Monthly Timing Indicators.
Meanwhile in the investment world, after the initial shock, there has been generally an ongoing recovery fuelled by Central Bank & Government support operations. This paused in September as the UK market fell back with the FTSE All Share delivering -1.7% total return. 
This leaves it and the other main indices like the FTSE 100 & FTSE 350 around 5% below their trends. While the Mid 250 and Small Cap indices have, somewhat surprisingly, held up slightly better and are as a result only 3% and 0.5% below their moving average trends as a result. This suggests that based on this and the other economic indicators that I use in conjunction with these, that one should still be cautious / hedged or even out of the market if you want to attempt market timing.

This has been the case since the start of the pandemic back in March, although as observed above this has been offset by the authorities efforts and thus far we have not seen the usual second down leg of the bear market. Indeed having said that the US has recovered so far and so rapidly that their sell of could be classified as a correction rather than a bear market. In the UK though, given the make up of our indices and a lack of Technology giants which have led the US rally has meant that our indices have lagged the recovery in the US headline indices badly, although US stocks ex the tech giants are still down a bit.

Compound Income Portfolio
​Longer term readers will know that despite the above suggestion from the timing indicators, this has remained fully invested to see how it fares through this more difficult period for markets and economies and also to see how effective the market timing turns out to be. 

So six months on since then the CI Portfolio is up 22.5% and the market has recovered by 6.95% helped by the exceptional support measures mentioned in the introduction. So, thanks to the timely support operations, market timing has not been that helpful so far in this GVC crisis, unlike the GFC in 2008 when the support measures were slower in coming to the rescue. 

In September the CIP did actually mange a positive total return of 0.5% versus the -1.7% from the FTSE All Share which I use as  a benchmark. So with the recovery in the last six months this leaves the portfolio still down by a disappointing 10.4% year to date, although this is still a lot less than the -19.9% for the FTSE All Share. The full history and total returns over the last 5 and a half years are available in a table here if that's of any interest to you and these and comparisons with various UK indices are summarised in the graph at the end of this piece.

This months screening brought up two obvious sale candidates where their Scores had fallen so far that I really had no excuse not to sell them. The first of these was a long term winner for the portfolio, Avon Rubber (AVON) which was first purchased in 2017 at under £10 per share. Thus although I'd given it the benefit of the doubt in recent months, I felt the rating had got too rich at around 35x with a sub 1% yield and earnings yield, and with the poor resulting Score of 44 it had to go - so I reluctantly finally sold out. Not that there is anything wrong with them and they should still grow strongly and their recent deals may improve the picture so I wouldn't put you off holding them if you do, but that's the process for this portfolio. 

The second sale, with an even lower score of 32 was a more recent lower quality value purchase Finsbury Foods (FIF). This had singularly failed to respond to the recent market rally and the shares had generally flat lined since purchase earlier this year. The Score had come down on their recent results which were a bit underwhelming, led to downgrades and failed to include a dividend this year too. So given that, despite the value on offer I let the process ditch them, although again they may be fine in the longer term although with less certainty than Avon perhaps. 

To replace these I added a couple of high quality classic compounding shares which are both paying dividends and are both cheaper than Avon but more expensive than Finsbury, you pay your money and take your choice. One is a more cyclical business that seems to have handled the pandemic reasonably well and now seems to be getting back into expansion mode again. While the other one is more of a steady Eddie with lots of recurring revenue but seems to have performed well despite its SME customer base and the pandemic effects as it transitions to more of a Software as a service business. Subscribers will have seen all the details of these in their file at the start of the month.

This does represent something of a relaxation of my historic value tendencies as I'm now trying to focus the portfolio more on quality compounders at a reasonable price with a focus on the earnings yield that they offer rather than getting too hung up on PE' s and yields. I guess it will remain to be seen how this goes as there is an on going debate about whether Value is overdue a comeback. It may not help in the short term as at the moment as we are going though the inflection point & crappy bombed out stocks seem to have been doing better alongside high tech giants but i think quality will out in the long run.

As for dividends these are in much shorter supply this year as has been widely publicised. Talking of which on a quick tot up I see that the dividends in the CI Portfolio are down by around 45% year to date compared to what was received last year in the first three quarters, although this will represent some different holdings as well as fewer specials and dividend cuts this year. This I would think is likely to broadly similar to the 50% or so fall that analysts are now projecting for the FTSE 100 this year. 

​Personal Note.
My own more broadly diversified portfolios are in aggregate also down by about 10% year to date. As for the income side of things, as I'm more diversified and use quite a few investment trusts, which have been able to maintain or increase their pay outs, our income has only taken about a 20% hit year to date, again not great but not too bad in the circumstances and in the context of what we'd achieved in the previous ten years. I can live with that. 

Now I know there are plenty of more nimble investors / traders out there who are now up and in some cases substantially - so hats off again to them. In reality it is horses for courses and not worth beating yourself up about how others are doing as long as it works for you and your objectives / temperament etc. Personally I'm in this for the long run and seeking to preserve and grow my Net worth and income in real terms in the long term which is what I continue to focus on. So I'll sign off there wish you all well in these current difficult times for everyone and hope that you have every success in achieving your goals in life and investing - whatever they may be.