Wild’s Winter Portfolios 2022: winners revealed

After running the latest numbers, Lee Wild names the stocks that make up this year’s winter portfolios.

There’s a seasonal anomaly that 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 FTSE 350 stocks that have delivered the most positive returns in the past 10 winters to create Wild’s Consistent Winter Portfolio.

This year’s portfolio of most reliable performers would have returned an average of 16.1%, excluding dividends, over the past 10 winters. For the benchmark FTSE 350 index it is just 3.7%

• Wild’s Winter Portfolios return for 2022-23

We relax the entry criteria for our second basket of shares - Wild’s Aggressive Winter Portfolio – in order to turbocharge potential returns, picking the five FTSE 350 stocks with the highest average returns but with a slightly lower ratio of positive years.

Last year there was a difference of six percentage points between the two portfolios, the chance of greater reward for taking that extra risk. However, with the aggressive portfolio offering an average historic return of 17.3% for the past decade, the difference this year is little more than one percentage point, even when entry requirements for the higher risk basket of shares are reduced to eight positive years in the past 10.

Performance of both winter portfolios has been more erratic since the pandemic, with seasonal trends disrupted by unusual and shocking stock market behaviour. While there are plenty of other global events influencing asset prices currently, none are as extreme as the pandemic.

It will be interesting to see if well-known trends like seasonal strategies are re-established this year. But, as I said in my article last week, investors must decide whether the aggressive portfolio’s limited historic outperformance is worth the extra perceived risk.

Risks for this year’s winter portfolios

As I pointed out in my recent article, there will be many significant hurdles over the next six months which the winter portfolios will have to navigate.

Global central banks are rapidly raising interest rates to fight inflation, currently at a 40-year high, but that strategy threatens consumer wealth and risks pushing economies into recession.

A cost-of-living crisis is already dampening demand, and higher interest rates have fed through to mortgage costs and borrowing costs in general. That pressure on household incomes could mean less money is spent on all sorts of discretionary items such as electronics, new sofas and holidays.

Financial markets have reacted violently to any hints that rates may rise more rapidly that expected, and policymakers have a tightrope to walk between taming inflation and avoiding recession.

The US Federal Reserve will be the central bank to watch, particularly this week when it announces its latest decision on rates. Be certain that if the US economy takes a hit, others will follow.

Politics recently demonstrated its ability to move asset prices, too, with Liz Truss and Kwasi Kwarteng’s radical budget threatening a major financial and economic crisis. New prime minister Rishi Sunak must steady the ship and keep markets onside. Investors will also be watching US midterm elections on 8 November.

Wild’s Consistent Winter Portfolio 2022-2023

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

Unusually, there are three companies which fit into both of this year’s winter portfolios, demonstrating a mix of consistency and high performance. First of them is self-storage firm Safestore (LSE:SAFE), one of only two survivors from last year's winter portfolios; Liontrust Asset Management (LSE:LIO) is the other.

The £2 billion company was the only stock in either of last year’s portfolios to generate a positive return over the winter, ending the six months up 4.8%.

It's not been a great summer for the business, with the shares down 25%. However, the stock has risen in each of the past 10 winters, generating an average return of 18.9%. Although Safestore has managed only single-digit gains in each of the past three years, recent underperformance could mean the shares enter the winter portfolios at an attractive price.

Liontrust debuted in the winter portfolios last year following a run of 10 consecutive winter gains, averaging an annual return of 31.5%. Despite offering the most promise, it ended last winter as the biggest loser, down 46.3%. Yes, there were exceptional circumstances, but the share price is down another 29% in the past six months, making it a 12-month loss of 62%. Despite that slump, it still has an enviable record and averages a return of 17.6% each winter. Again, having fallen so far, and factoring in a lot of bad news, maybe the asset manager with rediscover its mojo in 2022-23.

London Stock Exchange Group (LSE:LSEG) the biggest constituent in either portfolio, has only fallen during one winter in the past decade - in 2020 following results detailing costs of transforming and integrating its $27 billion acquisition of financial data and analytics company Refinitiv. The shares actually rose 11.5% last winter.

Hilton Food Group (LSE:HFG) makes the consistent portfolio for 2022. The only winter its shares have fallen in the past 10 years was in 2017, and then by just 0.7%. A profit warning in September plunged the share price to a six-year low, the company blaming the cost-of-living crisis for pressure on volumes. World events also caused “unprecedented raw material price increases” at its seafood business. There is always greater risk in the months after a profit warning, but the shares could be cheap if management is able to steady the ship.

Making up the basket of five consistent shares is discoverIE Group (LSE:DSCV). It’s possibly the least well-known of the lot, but a solid track record over the winter months secures the electronic components firm’s place in this year’s consistent and aggressive portfolios. After tripling in value from the Covid crash to September 2021, Discoverie shares fell back. They have since steadied and are up over 5% in the past six months.

Wild’s Aggressive Winter Portfolio 2022-2023

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

As well as the three stocks which appear in both portfolios, the aggressive portfolio includes two recognisable names – JD Sports Fashion (LSE:JD.) and Investec (LSE:INVP).

High street trainers-to-tracksuits chains JD has a high average historic return, but we’ve had to relax entry to the aggressive portfolio to just eight positive winters out of the past 10. That those two negative winters have occurred in the past three years clearly increases risk for the portfolio. It remains to be seen how inflation and the cost-of-living crisis will play out in the sports fashion sector.

Making up the portfolio is Investec. Shares in the £4 billion financial services company recovered strongly following the pandemic and have put in a respectable performance in the past two winters, doubling in value in 2020-21 and adding a further 42% last year. They’re down 5% since the last winter season ended in April but are up 20% in the past month. First-half results are scheduled for release on 17 November.

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.