Interactive Investor

Wild’s Winter Portfolios 2021: winners revealed

29th October 2021 13:00

Lee Wild from interactive investor

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After running the latest numbers, interactive investor's head of equity strategy names the stocks that make up this year’s winter portfolios.

There’s a seasonal anomaly that savvy stock market investors have been exploiting for years, and it’s one that piqued our interest in 2014. Having seen proof that, in certain circumstances, it is possible to time the market and generate a profit, we built a pair of winter portfolios to test the theory, and the significant outperformance since has guaranteed a return for an eighth year.

Using data supplied by Stephen Eckett, mathematician and author of publisher Harriman House’s Stock Market Almanac, we identify stocks that have risen every winter – between 1 November and 30 April – for the past decade. We simply pick the five with the best average winter returns for Wild’s Consistent Winter Portfolio.

This year’s portfolio of most reliable performers would have returned an average of 18.5%, excluding dividends, over the past 10 winters. For the benchmark FTSE 350 index it is just 4%.

To turbocharge potential returns, we relax the entry criteria for Wild’s Aggressive Winter Portfolio to a minimum nine positive years in the past decade. We then pick the five stocks with the highest average return. This year’s crop would have delivered an average historic return of 22.3%.

Risks for this year’s winter portfolios

While history tells us that these portfolios have worked in the past, there is no guarantee that they will continue to do so in future. It’s impossible to predict one-off company specific events. But we can, at least, run through some of the wider issues that might cause a negative upset for stock markets over the next six months.

I mentioned the following threats in my recent article, but there’s no harm in a reminder.

While UK stocks have lagged international rivals, and are widely accepted as offering good value currently, there are concerns both domestically and around potential threats from overseas.

Inflation gets all the headlines right now and talk of a 4% increase in the cost of living sometime soon is not idle speculation. There is even talk of 7% by next spring, and many companies may struggle to pass on higher costs to customers. An energy crisis could also regain momentum, especially if we have a bad winter. Higher interest rates are also inevitable, if not this year, then early in 2022. And none of us needs reminding of the ongoing pandemic.

Looking across the pond, Americans are suffering the same issues around supply and high prices, so any escalation of the inflationary scenario could easily be felt over here. Tapering of US stimulus measures is another inevitability and could be imminent. The government can’t continue buying up tens of billions of dollars of bonds and mortgage-backed securities each month forever. Key here will be to avoid a repeat of the Taper Tantrum of 2013. 

Wild’s Consistent Winter Portfolio 2021-2022

Company Ticker Activity Track record (Years) Positive returns (Years) Average return (%)
Liontrust Asset Management LIO Asset manager 10 10 31.5
Safestore SAFE Provider of self-storage 10 10 19.2
XP Power   XPP Manufactures power adapters 10 10 17.6
Halma  HLMA Technology conglomerate 10 10 13.6
Admiral ADM Insurance 10 10 10.6

Source: Harriman House. Past performance is not a guide to future performance

As shocks go, this is a big one. Croda International (LSE:CRDA), the FTSE 100 speciality chemicals giant, appeared in the very first consistent portfolio in 2014. It’s been there ever since and has generated profits every year. But others have done better this time, and relative underperformance has cost the company its place in this exclusive basket of five shares. Incredibly, Croda missed out on inclusion by a hair’s breadth, its average winter performance just one-tenth of a percentage point behind the fifth-placed stock.

Less surprising is the absence of London Stock Exchange Group (LSE:LSEG). It promised much last year, but badly received annual results and the expensive acquisition of Refinitiv, which dilutes LSE’s growth profile, hurt the shares and dragged down performance of the portfolio. Worse still, LSE was also included in the aggressive portfolio.

Self-storage firm Safestore (LSE:SAFE), technology conglomerate Halma (LSE:HLMA) and insurer Admiral (LSE:ADM) keep their places, reward for delivering strong gains last winter. So that means two new players in this year’s list of reliably seasonal stocks. 

First of the newbies is Liontrust Asset Management (LSE:LIO). It only won promotion to the FTSE 350 index – a requirement for inclusion in Wild’s portfolios – in June 2020, but it has a perfect record of winter gains over the past decade. Its track record of an average 31.5% gain every winter is also miles ahead of its nearest rival.

XP Power (LSE:XPP), a manufacturer of power adapters, is another relative newcomer to the FTSE 350. It only entered the mid-cap index in March 2020, so this is the first year it is eligible for the winter portfolios. It’s been a favourite of interactive investor’s companies analyst Richard Beddard for many years. You can see what Richard thinks of the company here

Wild’s Aggressive Winter Portfolio 2021-2022

Company Ticker Activity Track record (Years) Positive returns (Years) Average return (%)
Liontrust Asset Management LIO Asset manager 10 10 31.5
Synthomer SYNT Chemicals 10 9 21.4
Spectris SXS Precision instrumentation 10 9 20.6
Safestore SAFE Provider of self-storage 10 10 19.2
Hill & Smith  HILS Infrastructure products 10 9 18.6

Source: Harriman House. Past performance is not a guide to future performance

A year ago, Wild’s Aggressive Winter Portfolio underwent a major overhaul, with four stocks losing their place. This year there are just two changes. London Stock Exchange is out for the same reason as it was ejected from the consistent portfolio. And Diploma (LSE:DPLM), the technical products and services firm, fails to keep its place despite a 28.8% profit in the 2020 portfolio. 

Diploma missed out on a second year in the portfolios by less than 50 basis points, pipped to the post by infrastructure products company Hill & Smith (LSE:HILS). The firm, which has appeared in these portfolios before, boasts a 10-year average winter profit of 18.6%, so was always in with a shout.

Liontrust also has such a strong winter performance record that it makes this slightly racier portfolio too. So does Safestore, back for a second year in the winter portfolios.
 
That means another two of last year’s Aggressive portfolio constituents are included again. Precision instrumentation expert Spectris (LSE:SXS) guaranteed its spot with a magnificent 31.4% gain in 2020. It has risen in nine of the past 10 winters – 2013 was its only down year - and averages a 20.6% return over the six months. 

Synthomer (LSE:SYNT) makes up this year’s Wild’s Aggressive Winter Portfolio. The supplier of chemicals used to make paint and latex gloves, was last year’s star performer, returning 34.8% between November 2020 and April 2021. Apart from 2018, Synthomer shares have risen every winter for at least the past 12 years. The stock had fallen as much as 10% since 30 April this year – the start of the six summer months – but they’ve risen in recent days following news it has agreed to pay $1 billion in cash for the adhesive resins business of Eastman Chemical Company. The deal will be part-funded by a now-completed £205 million share placing at 485p. 

Stephen Eckett
Stephen Eckett started his career with Baring Securities and then later worked for Bankers Trust and SG Warburg, during which time he worked in London, Hong Kong and Tokyo. After settling in France, he co-founded Harriman House which has become a leading independent publisher of financial books in the UK. He also writes books on finance including, most recently, the Harriman Stock Market Almanac.

Past performance of the underlying constituents is not a guarantee of future performance. The value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. These portfolios are designed for a short trading period, so market fluctuations may be more pronounced. If you buy the portfolio the holdings will not be automatically sold on 30 April.

ii publishes information and ideas which are of interest to investors. Any recommendation made here does not take into account your circumstances. This is not a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised investment adviser. ii do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions.

These portfolios consist of a very limited number of underlying securities. Any portfolio with fewer than 30 constituents is considered ‘highly concentrated’ and subject to a high level of concentration risk.  Concentration risk is when there is an insufficient level of diversification which means an investor is excessively exposed to one or a limited number of investments. These portfolios should not therefore be used for all or the majority of an investor’s assets but should be seen as a research or potential trading idea for a part of an otherwise broadly diversified portfolio.

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.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

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