ii Winter Portfolios: Down, but miles ahead of benchmark

by Lee Wild from interactive investor |

In one of the most volatile months for stock markets in years, here’s how our seasonal portfolios coped.

Even hardened stock market professionals have been surprised at the volatility experienced on global financial exchanges in the past few weeks. 

All the major indices are down heavily since the middle of February, and a brief rally in recent days has unwound at blistering pace. 

Russia fell 14% last month, the Dow Jones 10%, the FTSE 100 9.7%, the Japanese Nikkei 8.9%, and even the popular Nasdaq US tech index lost 6.4%. Losses in the past few days have dumped most indices deep into the red for 2020, and to multi-month or multi-year lows.

Until we know the limits of this coronavirus outbreak, global equity markets will remain hugely volatile. Big price declines will attract bargain hunters, while bears will sell into any recovery. Expect further big swings across asset classes until it becomes easier to more accurately calculate the economic impact of COVID-19.

The interactive investor Consistent Winter Portfolio, made up of five FTSE 350 stocks with the most reliable returns over the past 10 years, fell 7.7% in February. Much of that decline occurred in the final week of the month, and within days of the portfolio hitting a winter peak of +14.9%.

Meanwhile, the interactive investor Aggressive Winter Portfolio, which relaxes the entry criteria only very slightly in return for much higher potential returns, fell by 12.4%. The sharper decline is partly explained by the much bigger gains made prior to the sell-off. On 17 February, the higher risk portfolio peaked at +18.6%!

For comparison, the FTSE 350 benchmark index ended February with a one-month loss of 9.5%. 

Overall, for the winter portfolio period so far – from 1 November to end of February – our consistent portfolio was up 0.4%, not including dividend income, the aggressive portfolio was down just over 0.5%, while the FTSE 350 had fallen 9.5%.

interactive investor Consistent Winter Portfolio 2019-2020

Source: interactive investor, Morningstar data  Past performance is not a guide to future performance

Because the consistent portfolio is packed with great companies that had outperformed this winter, there were some big fallers as investors trousered profits. All five constituents were down between 6% and 9%, although that’s less than the wider stock market. 

Hill & Smith (LSE:HILS) suffered least damage, down 5.9% in February, and results published early March justified recent optimism. 

There was little to choose between the rest. Kitchen supplier Howden Joinery (LSE:HWDN) fell 7.6%, Holiday Inn and Crowne Plaza owner InterContinental Hotels (LSE:IHG) 8.2%, technology conglomerate Halma (LSE:HLMA) 8.4%, and blue-chip speciality chemicals firm Croda (LSE:CRDA) 8.6%.

interactive investor Aggressive Winter Portfolio 2019-2020

Source: interactive investor, Morningstar data  Past performance is not a guide to future performance

One-month losses were more savage in the higher-risk aggressive portfolio, although US-focused equipment rental giant Ashtead (LSE:AHT) registered the smallest decline across both strategies, down just 2.7% for the month. Earlier in the month, bullish analysts at broker JP Morgan upgraded their price target for the shares to 3,250p.

Elsewhere, tracksuits-to-trainers retail chain JD Sports (LSE:JD.) shares fell 10% in February and heat treatment engineer Bodycote (LSE:BOY) almost 11%. But biggest casualties last month were chemicals company Synthomer (LSE:SYNT) and We-Work rival IWG (LSE:IWG), down 16% and 20% respectively. Synthomer is still generating a profit for our portfolio, although IWG now sits in the red. 

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

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