Introduction & Market Background
Having spent a large part of April travelling, I was please to see that the UK Equity market continued with its recent bull run and managed to hit new all time highs (FTSE 100 & FTSE All Share) while I was away, although it is notable that the FTSE Mid 250, FTSE Small Cap and various AIM indices still remain some way below their all time highs. The larger indices have been helped by recovery in larger sectors such as Oils, Mining and Banks, while the smaller indices are more exposed to domestic orientated sectors which have struggled along with the UK Economy.
The underperformance of the smaller indices also seems to refelct a general lack of interest in UK equities and a hollowing out of the market as bids and takeovers keep coming for undervalued UK companies, but not many new ones being prepared to list here to replace them given the disparity in ratings compared to other markets and the US in particular. While some larger companies have or are continuing to float the idea of shifting their listings. This trend has also been reinforced by both institutions and individuals increasingly looking to diversify their investments overseas and chase the excitement of AI investment opportunities in the US and elsewhere which are lacking in the UK. The Chancellor, Jeremy Hunt, has even floated the idea of a modest £5,000 increase in ISA allowances to facilitate a "British" ISA, although whther that ever sees the light of day before the Tories get dumped out of office remains to be seen. Finally in an ironic twist Coutts Investment Management annouced this month that it will belatedly join the rush to diversify away from UK Equities towards Global equities. I say ironic as Coutts is part of Nat West Group which is 28% owned by HMT, so they obviously didn't get the memo.
Performance Review
The FTSE All Share managed another positive return of +2.5% in April. It was also pleasng to see that the Compound Income Scores Protfolio (CISP) also continued its good recent run with another month of outperfromance with a total return of +2.9% in April. This leaves it up by 11.4% in the year to date versus 6.1% for the FTSE All Share. It meant that the CISP also made it to new highs this month, surpassing the previous peak value achieved in August 2021. This is particularly encouraging as the portfolio has achieved this despite remaining heavily over weight in Mid & smaller Cap names versus the FTSE All Share. Please see the table on the Scores page for full details of performance over this year and longer time periods.
In terms of stocks last month the leaders were a mixed bag of the household goods supplier, Ultimate Products (ULTP) and The Property Franchise Group (TPFG) which both responded positively to results, while Shell benefitted from firmer oil prices on the back of more instability in the Middle East. On the downside the likes of Record (REC), Man Group (EMG) & IMI all underperformed in repsonse to recent results.
There were no outright sales or new purchases coming out of the monthly secreening this month, but prior to my trip I did carry out some rebalancing of postions with a couple of top slices and three additions to existing positions. Subscribers should see their sheet for full details of these an all the other holdings, thier Scores and their current weights in the portfolio.
Summary & Conclusion
Another good month for UK equities, continuing the bull run which started in November last year that has taken the larger indices to new all time highs, while smaller indices continue to lag behind. As a result of this there is plenty of value on offer in the UK market which has led to a number of takeover bids this year as Corporate buyers step in attracted by the value on offer. Hopefully this might mean a continuation of the trend and a broadening out of the gains rather than a sell in May and go away type correction. Having said that continued outflows from UK Equities as investors switch to a less home biased positioning and more more global equities seems likely to continue to act as a drag on UK equities.
The CISP which has produce around 10% per annum since inception in 2015 versus around 5% for the FTSE All Share & has thus already exceeded those average annual return this year to date with +11.4% versus +6.1% for the FTSE All share. While the Portfolio has also made a new all time high in value terms unlike the Mid and Small cap indices, even though these make up a large part of the portfolio. Given this and the longer term performance this suggests that the Compoud Income Scores may be a good way of identifying UK shares with the potential to outpeform the market, but ovbviously this is not guaranteed as past performace is not necessarily a guide to the future etc.
Nevertheless, if you are reading this and you are not a subcriber and you would be interested in seeing the portfolio and using the Scores in your own investing, then pelase see the Scores page for details of what they can offer and the subscription options. Othewise may I wish all readers here a happy early May Bank Holdiay & hopefully more gains from markets & some warmer weather to come too!
