Hot stocks blast benchmark – Winter Portfolio Jan 15 update by Lee Wild
There’s a seasonal trading strategy that typically generates far better returns than if you had stayed invested all year round. Over the past decade, it has outperformed the FTSE 350 index by at least five times. And it’s incredibly simple, too, giving investors both a specific entry and exit date. Now, two months into this six-month trade, there’s plenty of reason to be optimistic.
Buy on the first trading day of November and sell on 30 April, suggests the strategy. It’s based on the theory that far more money flows into equity markets during the winter months than in the quieter summer period when thoughts turn away from investing and to holidays and the sporting calendar.
Our sister website Interactive Investor teamed up with Harriman House, publisher of The UK Stock Market Almanac, and fine-tuned the data to generate even bigger potential profits.
[Chart removed – Winter Portfolio]
First, they took the companies which had delivered the most positive annual returns over the past 10 years to form our Consistent Winter Portfolio. It has generated an average annual return of 26 per cent over the past decade.
The Aggressive Winter Portfolio is more flexible on track record, but the extra risk is rewarded with potentially higher returns – an average of 37 per cent.
Here’s a round-up of the highlights and lowlights from the second month of this six-month strategy.
Aggressive Winter Portfolio
December was not a great month for the major stock indices. Historically the best month for shares, the FTSE 100 index fell in December for the first time since 2002 and only the fifth time since 1984.
Plunging oil prices, the Russian economic crisis and political concerns in Greece created huge volatility, which has spilled over into 2015.
However, our Aggressive Winter Portfolio raced ahead, thrashing the FTSE 350 for a second month. It returned 6.9 per cent over the four weeks compared with a 1.7 per cent decline for the benchmark index. And every constituent chipped in.
Equipment rental firm Ashtead (AHT) starred again, rocketing 8.5 per cent after stunning results, as did online gaming firm Bwin.party Digital Entertainment (BPTY), up 9.3 per cent despite weak fourth-quarter gross margin in sports betting.
Playtech (PTEC), the online gaming software business, jumped by more than 7 per cent, erasing much of the ground lost during November. It could bid for Bwin, according to rumours.
Workspace provider Regus (RGU) did well, too, up 6 per cent in December, and Taylor Wimpey (TW.) rose by 2.7 per cent at the beginning of what is a historically lucrative period for the housebuilding sector.
Consistent Winter Portfolio
The Consistent Winter Portfolio rose 2.8 per cent in December, far less than its aggressive sister portfolio, yet still much better than the FTSE 350’s 1.7 per cent decline. It also clawed back all of the previous month’s underperformance (see chart), and more.
As well as Ashtead and workspace provider Regus, which feature in both portfolios, it was another great month for speciality chemicals firm Croda International (CRDA), up 8.5 per cent.
Gains would have been even better but for fund manager Henderson (HGG), off 4 per cent, and a second month of serious losses at Hunting (HTG).
After slumping 22 per cent in November, the troubled oil services provider lost another 8 per cent last month as the plunge in oil prices entered a new disturbing phase. Lower prices likely mean less work for suppliers like Hunting.
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