January proved to be a little less favourable than December as the Corona virus took the shine off of an otherwise positive start to the year. There is an old saying that as January goes so goes the year. So it is therefore a bit disappointing / worrying perhaps that as a result of the virus related concerns most global equity markets provided negative returns in January. The exception to this was the Tech heavy Nasdaq which still managed a further rise as investors and index funds presumably continued to buy in despite the high gains / ratings already seen there - momentum in action I guess.
Compound Income Portfolio
Against a 3.25% negative return for the FTSE All Share Index in January, the Compound Income Scores Portfolio managed a 0.76% positive return for a 4% relative out performance for the month. This is a good way to start the year , but early days yet given the volatile market so far. Since inception nearly five years ago this leave the CI Portfolio up by 104% versus the total return of 32% from the FTSE All Share. You can see the full performance history here if you are interested in that.
The performance this month was helped by the two largest holdings in the portfolio both posting decent gains of 19.4% & 9.3% on the back of positive trading updates. At the other end of the scale there was one painful performer which fell by 24.6% although it was one of the smallest positions in the fund as it had warned last year too.
This one finally exited at this months screening on the back of its deteriorating score along with two other poorer scoring stocks with mixed looking outlooks that had small market caps. These were replaced by two larger stocks, one a reasonable quality play, if a little dull, which is popular with private investors I think, although it had suffered from fears over the virus scare in China. While the other is I think a terrific contrarian value play with an upcoming catalyst. It scores well and trades on around 7x with a near 6% yield which is more than 2x covered. It also has cash on the balance sheet and trades at around book value.
Subscribers can see full details of these trades in their Scores sheet in the transactions tab, but if you are not familiar with the Scores and think you might like to gain access then you can find out more about them for just and how to sign up by clicking here.
Market Timing Indicators
Despite the fall in indices this month these all remained in positive territory with the Mid & Small Cap indices being in a much more bullish trend thanks to the post BREXIT-Election boost. Interestingly the US Manufacturing ISM has also just bounced back above 50 suggesting that there was something of a recovery in sentiment going on post the China trade deal, although this may now ironically be snuffed out by the China virus.
Summary & Conclusion
So a disappointing start to the year which might be worrying given the old saying of "as January goes so goes the year." In any event I guess it may not be too surprising given the euphoria we saw as we came into the year and the complacency that seemed to be around despite the stretched ratings in the US. Aside from that Emerging markets and the UK are generally seen as better value and therefore less exposed, but the threat from the Corona virus and BREXIT may diminish those attractions in the short term I guess. Meanwhile investors continue to chase the likes of Tesla to an ever higher (dare I say ridiculous) rating.
I would assume that neither of those worries will be as bad a feared and as the timing indicators and other economic statistics are still suggesting to stay invested, in the absence of a more serious economic down turn in the US appearing, the CIS Portfolio will remain fully invested as a result bar a little residual cash. Given the value on offer in the UK market that it focuses on I'm comfortable with this & would like to think that the Scores will continue to add value in the months ahead. Good luck with your investing in the months ahead too and mind how you go.