February proved to be a difficult month for investors generally and also the Compound Income Scores Portfolio as it ended the month with a negative total return of -1.66% which compared to a total return on the FTSE All share of +0.8% for an underperformance of 2.46% on the month. This leaves it 1.76% behind the index in 2016 to date but still ahead by 17.92% since inception last April as it has produced a +11.3% total return versus -6.62% for the All Share.
It is perhaps not surprising to see the portfolio giving back some of its outperformance, as it had benefited from exposure to smaller and mid sized companies and limited exposure to FTSE stocks and the commodity names in particular. Therefore as some of these latter stocks led the recovery in the market towards the end of February and small companies lagged somewhat this helps to explain some of the recent trend.
In addition at the individual stock level the largest fallers, with double digit losses on the month were: RM (RM.), Savills (SVS) and Paypoint (PAY) which all responded negatively to trading updates. On a more positive tack the biggest risers on the month were XL Media (XLM), which was added to the portfolio last month on the back of a risk reduction trade in 32Red which continued its exponential rise this month and EMIS which bounced back from a prior negative reaction to its full year figures.
Overall after a tricky start to the year for the market and the portfolio, although it looks reasonably well placed overall with a forecast PE and yield of 13.25x and 3.61% respectively while the dividends are forecast to grow on average by 13.1% which seems fine to me. Meanwhile it remains heavily exposed to consumer cyclicals, industrials and financial sectors which seems appropriate if the current economic picture remains the same, but could leave it exposed if we are in fact sliding towards recession, which I don't think we are. So the portfolio will remain positioned like that in any event until the next quarterly re-screening due at the end of March and the first anniversary since the launch of the portfolio.