Interactive Investor

Wild’s Winter Portfolios 2020: LSE blamed for bad month

12th April 2021 17:22

Lee Wild from interactive investor

One stock torpedoed both portfolios in March but hopes of a strong end to the winter are high.

After November’s vaccine joy put a rocket under share prices, progress in the UK has been rather pedestrian. However, there were still gains to be had for stock market investors in March, and April has started strongly.

Inflation and the impact of higher interest rates on economic growth were key considerations for investors. But, in a month where a container ship blocked $9 billion of trade – per day – in the Suez Canal, the FTSE 350 index rose 3.4%. That capped a bad month for Wild’s Winter Portfolios, which were both hit by the crash in the price of London Stock Exchange (LSE:LSEG) shares. Read more on that below.

Wild’s Aggressive Winter Portfolio fell 1.7% in March as the LSE’s dive was partially offset by gains elsewhere. However, Wild’s Consistent Winter Portfolio fell 4.7% in one month, as other constituents delivered only modest gains.

Consistent Winter Portfolio
Compiling the two winter portfolios is straightforward. The Consistent portfolio is a basket of five FTSE 350 stocks with the most stable track record of returns over the past decade. Each has risen every year for the past 10 years.
Aggressive Winter Portfolio
For the Aggressive Winter Portfolio, the FTSE 350 constituents must have delivered the highest average annual returns over the winter. While average returns are our primary criterion, stocks must also have risen over the winter months in at least nine of the past 10 years.

With just one month left to go, both Wild’s consistent and aggressive portfolios are in positive territory for this season’s strategy – up 0.2% and 10.9% respectively. But the FTSE 350 benchmark index is up 21.2%.

April has started strongly and, as I write, the aggressive portfolio is generating a 13.4% return for the strategy so far and the consistent portfolio 5%, compared with 24.6% for the FTSE 350. What will it be at 4.30pm on 30 April?

Wild’s Consistent Winter Portfolio 2020-21

Source: interactive investor. Past performance is not a guide to future performance

Euphoria around London Stock Exchange’s $27 billion purchase of data giant Refinitiv was short-lived. Only a month after writing of its shares hitting a record share, the stock suffered one of the mightiest hangovers of any blue-chip since the pandemic sell-off a year ago. A near-28% slide took almost the whole month to complete, but it means a 16% profit for this winter’s portfolio became a 16% loss. And it was a double blow because LSE is a constituent in both the consistent and aggressive portfolios. 

The decline began as a reaction to LSE’s annual results early March. Higher costs meant adjusted profits missed forecasts. Refinitiv also dilutes the growth profile, and the shares are certainly not cheap. Guidance for revenue growth of under 5% in 2021 is also disappointing, and analysts believe it could be worse given forecasts are made on a constant currency basis. A strong pound and high level of Refinitiv’s revenue in dollars is a worry.  

However, non-executive directors bought over £200,000 of LSE stock in the aftermath and, while City price targets now sit in the mid-£70’s, the shares rose by 8% in the first week of April. Fingers crossed the recovery continues through April!

Safestore (LSE:SAFE), another of the winter’s laggards, was down a fraction over the month. Again, it is a constituent of both portfolios, so it’s 1% decline for this year’s strategy has proved a drag on both the consistent and higher risk portfolios.

Halma (LSE:HLMA), the technology conglomerate, had one of its best months this winter with a 4.7% advance, which leaves it in positive territory for the winter. A share recovery, already underway, was justified by news of strong progress in the second half of its financial year. Full-year adjusted profit before tax is expected to match the year before versus prior guidance of around 5% below the 2020 number.

Croda (LSE:CRDA) has been another disappointment this strategy, but it had a good March, and spiked early in the month on news it is supplying novel excipients used in the manufacture of the Covid-19 vaccine. Gains faded quickly, but April has started strongly and the shares are near a record high.

Insurer Admiral (LSE:ADM)’s annual results triggered a sell-off, despite its attractive dividend. But the shares were still in positive territory for the month and are up nearly 13% since the end of October.

Wild’s Aggressive Winter Portfolio 2020-21

Source: interactive investor. Past performance is not a guide to future performance

The negative influence of LSE and Safestore played out on the aggressive portfolio in March, but there were strong performances elsewhere. Best of all was Diploma (LSE:DPLM), building on big gains in February. The technical products and services company rose by almost 10% last month and has risen a further 7% since the month-end to sit near a record high. That followed news of a better-than-expected performance in its first half.

Spectris (LSE:SXS) remains the star of the show, up 9.7% in March, taking gains for this year’s winter portfolio to over 34%. There was no new news last month, but momentum is on its side. Synthomer (LSE:SYNT), the latex gloves firm and another top performer this season, had a quiet month by its standards, but the shares are still up 23% since the end of October.

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