After scraping into positive territory in January, despite the negative returns from the broader market, the Compound Income Scores Portfolio (CISP) was not able to withstand the continued sell off in February. Indeed it gave back a little of its outperformance from January,  as it finished February with a return of -3% versus the -2.6% from the FTSE All Share which it is measured against. This leaves it down by 3% for the year to date compared to -4.4% for the All Share, while since inception nearly three years ago the comparisons are +63.7% & +20.6% respectively.

The positions that resisted the falls and actually rose in value were a mixed bag of a couple of miners, a toy maker, a crockery manufacturer and a magazine publisher (FXPO, CAML, CCT, PMP & AUTO). While the list of fallers were headed up by a couple of fund managers, a house builder, a book publisher and a digital marketing company (JUP, MGR, BWY, BMY & TAP) with some of those obviously geared into markets while the others seemed to just be suffering from profit taking.

So not much to get excited about in February and March hasn't started much better either. I'll leave it there for now as I get the impression readers aren't that interested in this stuff, but nevertheless I'll endeavour to update you on this months trades later in the week - so check back then if that is of any interest.

As I'm sure you are aware by now February was a poor month for stock markets and the UK was no different. The larger indices led the way down with the FTSE 100 producing a -2.55% total return. Mid and Small Cap stocks held up slightly better this month again but they also produced negative returns, so there was no place to hide from the down draught. This has brought the main larger and broader indices such as FTSE 100, 350 and All Share below their simple 10 month moving averages by 0.8%., 0.7% & 0.6% respectively. While the Small Cap and Mid Cap indices, having held up slightly better in the sell off remain just above their moving averages by 1% and 0.1% respectively for now.

Thus a mixed picture on these indicators which ordinarily would suggest a note of caution towards the market in the main and could suggest the start of a more bearish trend generally. As discussed here before however, these type of indicators can be vulnerable to whipsawing - where they force you to sell out and then buy back in higher up when they then subsequently turn positive again. Thus I tend to use these as a guide to overall market mood, but I am not following the signals in the short term unless they are confirmed by economic indicators like economic growth generally and in particular the US Unemployment rate, ISM indices and the shape of the yield curve.

Since these other indicators are all currently in positive territory I'm not inclined to take action based on the market timing indicators other than thinking that it might represent a buying opportunity in the short term - perhaps. Having said that though it is worth bearing in mind that the general consensus is that we have entered the late stage of this particular cycle. Now while last year was unusually calm and profitable making many novice investors think that this game is easy and that they investment gods, I suspect this year will be much more testing. Indeed the late stage of the stock market cycle is typified by increased volatility and the market has certainly been taking no prisoners on the hint of any disappointment so far this year.

Now that's not to say that the market can't go higher from here if the earnings and dividend growth that is expected is delivered. It is just that progress from here is likely to be much less serene and will probably be more a case of two steps forward and one step back. We will however of course have to keep an eye on how "events" pan out and see if all the concerns about rising inflation, interest rates, wages, trade tariffs, BREXIT etc. etc. finally prove sufficient to derail economies and stock markets. So given the icy weather and the cooler tone in the market wrap up warm and be careful out there as sliding down hill on snow and in the markets can be painful.

XP Power (XPP) a long standing holding in the Compound Income Scores Portfolio (CISP) has announced final result for the year to December 2017 today. These were good as expected given their previous updates, but did still came in slightly ahead of forecasts at the earnings and dividend lines. While James Peters, the Chairman of XP Power struck a reasonably confident note tinged with some realism when he said: ..."Although we cannot be immune from all external economic shocks resulting from cyclicality in the capital equipment markets we serve, we are optimistic regarding our prospects for 2018.”

Thus they seem set fair for another reasonable year and if you want to read more about the results I suggest you look them up on your favoured news provider. In addition there was a good sponsored brokers note from Edison with an update on the back of the results which included some upgrades from them given the results beat their forecasts and the outlook seems fine. Their forecasts for this year of 158.9p with an 82p dividend may, they suggest , still be conservative with the possibility of upgrades as the year progresses. Nevertheless at the current 3180p price, this does leave them on just under 20x with a 2.6% yield, which looks fairly full but is probably deserved given the quality of their business and the steady delivery they have offered over recent years and their on going growth and investment plans.

On the charts I note a gap the 200 day moving average and a gap on the chart from their previous positive update at around 3000p which could offer a good entry point if they should get down there on any more market weakness or profit taking. I say that because this one does tend to move in fits and starts with strong rises punctuated by some long sideways pauses, as seen a couple of times in the last year. It does however continue to score reasonably well on the Compound Income Scores and will therefore remain in the portfolio.

That's all I have time for today but, weather permitting, I hope to be back tomorrow with a month end update on the CISP and the timing indicators for the UK Market. So hope to see you back here then and mind how you go in the snow and keep warm if you can.

A quick month end round up of recent results from companies held in the Compound Income Scores Portfolio (CISP). Last week we had interim results from Hays (HAS) which showed strong growth and material investment in their growth markets with 22 countries growing net fees by more than 10%. These are overseas as the UK continued to lag so they are investing and increasing their International consultant headcount by 18% to reflect this.

Looking at the numbers which showed 18% profits and earnings growth and a 10% increase in the dividend leaves them well placed to hit and probably exceed full year forecasts in my view. I say this as even if they were flat in H2 I calculate they would exceed current forecasts and given the momentum and investment they are putting in I'd bee surprised if they were flat in h2, although I guess they will be up against tough comparatives.

Thus I was surprised that the shares came off after the numbers despite on going upgrades. Perhaps this was a behavioural bias coming into play as they were trading around 12 month highs and looked like breaking into new high ground. They have however found support above the previous 12 month high so personally I think this may be a good buying opportunity as they still score reasonably well too.

This week we have had more good results from Croda (CRDA) the high quality chemical company which is therefore relatively expensive on about 24x this coming years earnings and a yield of barely 2%. The results were there or there about but probably not sufficient to push it ahead from here given the rating and especially in the absence of a special dividend which some nay have been looking for.

While Jupiter Asset Management (JUP) the high performing fund manager which has 81% of mutual fund AUM with investment performance above median over three years also came in around forecasts as the earnings level although the dividend in total up 20% was better than expected thanks to the (usual) special dividend. This leaves them on a reasonable looking 14x with a 6%+ dividend yield, assuming markets continue to progress allowing them to pay another special dividend next year. If you are still bullish on markets then it could be of interest down here as it has come back sharply in the recent correction.

That's it for now but back soon with a month end update on the portfolio and the UK market timing indicators.

... results today from Jarvis Investment Management (JIM) the small (£60m Market Cap.) stock broking outfit. The results were excellent, as expected, with the headlines of a 22% increase in profits and earnings together with a 34% increase in the dividend, although the Chairman's statement rather managed to snatch defeat from the jaws of victory. This was quite downbeat in tone given the increased regulatory requirements that their industry is facing. He said that considerable time and resources have been, and continue to be, spent preparing and satisfying the requirements of MIFID II and GDPR (General Data Protection Regulation). He went onto say:

"That these all come at a commercial cost for the firms' required to implement and enforce them. In the latter half of the year, and going forward, we will be incurring higher costs on software, data feeds and higher staff numbers to ensure policies are correctly implemented and monitored."

He then went onto talk about the growth the business has seen over the last few years and how it has now represents the maturing of Jarvis from small company beginnings. He finished off by saying:

"With that in mind I am urging investors to be realistic about near term results. As highlighted above our cost base has increased, so revenues will need to increase at a higher rate to maintain the growth of the past. That is not to say it cannot be done, especially if interest rates increase."

So he seems to be trying to dampen expectations after such a stellar year and suggesting that some growth will be required just to cover the extra costs and I guess if it doesn't materialise this year then the profits could even go backwards given the higher cost base.
It is however worth bearing in mind his comment about interest rates as they can and do earn quite a bit from cash on deposit with them and you never know the B of E might one day raise base rates from their emergency level of 0.5% given the inflation & employment situation.

So a bit disappointing to say the least and to see the shares off first thing, but probably not surprising given the statement, although the initial fall seemed a bit over done to me. We will have to wait and see where the forecasts come out given these figures probably beat expectation but the statement has probably tempered the potential for any upgrades or could even lead to downgrades. This should be clearer by the time of the next monthly re-screening of the CISP so will have to see how it looks then once the dust has settled.