Performance Review.
December turned out to be a less positive month for markets as the recent bear market / Santa rally ran out of steam.The FTSE All Share index which I use as a benchmark for the Compound Income Scores Portfolio (CISP) delivered a -1.4% total return for the month, which leaves it with a positive total return of +0.34% for the year. Against this the CISP had a marginally less bad month producing a total return of -1.2%. Thus for the year the CISP  produced a -10.3% total return. While this is not a great performance against the broader market, dominated as it is by large oils, miners and pharmaceutical stocks, I don't think it is too bad against the Mid 250 (-17.4%), Small Cap (-13.56%) and FTSE Aim down around -30% in capital terms. As you can see the portfolio has significant exposure to Mid Cap and Smaller Companies (including AIM stocks) suggesting that the Scores and the monthly screening process have added some relative value this year against those parts of the market, if not the FTSE 100 which manged a +4.7% total return this year. Please see the table at the top & Graphs in the Scores & Portfolio sections linked above and at the top of this post for a more detailed history of this, although it is worth noting that the portfolio did benefit from its above average exposure to Mid & Small Cap names in the past. I would expect it too in the future too at some point when better economic and market condiitons arrive.

In a difficult year for investors I find it amusing that FTSE 100 has finally had its year in the sun after being generally be-rated as being a useless index and it being suggested that all you needed was a mix of NASDAQ, FANG tech stocks, US large cap generally and Bitcoin perhaps. All of which saw heavy falls as valuations finally started to matter again as interest rates and bond yield finally climbed off of what had been assumed to be a permanent floor. Going forwards it remains to be seen if the recent trend of value outperformance will continue. Or if growth stocks will reassert themeselves as and when interest rates and bond yields stop rising and maybe even start heading down again if inflation shows signs of coming under control.

Portfolio Review
As shown in the fact sheet for December below top contributors were Sylvania Platinum (SLP) on no real news, recent purchase Renew Holdings (RNWH) which advanced after their good results towards the end of last month. While BA Systems (BA.) (which I have retained despite its lower Score as it looks technically strong with good momentum) took third place as the war in Ukraine rumbles on & as it bounced back from a weak performance in November. On the downside there were less significant moves but the worst came from Airtel Africa (AAF), MP Evans (MPE) & Robert Walters (RWA).

Transactions in December saw the sale of S&U (SUS) based on its low score, although it still seems like a well managed company to me , so I wouldn't put you off holding it for the long term. A more marginal sales based on their score were top slices of Airtel Africa (AAF) (good as it turned out as it was a top 3 negative contributor this month) & Appreciate (APP) as they had grown to be large holdings so I reduced them as a source of funds to help fund this months purchase at an average weight. In addition, somewhat unusually, I also completed a mid month sale of the rest of Appreciate to put the proceeds to work in the bidder Paypoint (PAY) as their shares had fallen back despite the likely sizeable upgrades to come assuming the bid completes. Maybe I should have been more patient as arbitragers seems to be shorting Paypoint to take advatage of the dicount in the Appreciate price to the bid. I could have then topped it up assuming the bid completed, but I just felt it was a good entry point in Paypoint down towards 500p, as ever time will tell on that.

Otherwise against these sales & top slicing the new purchase was perhaps controversially in TBC Bank(TBCG) the large Georgian bank which looks incredibly cheap given the concerns about the Ukraine war in the region rumbling on, although given how it is going for Putin I don't see him invading Georgia any timne soon. Against that it has strong market positon in banking, a number of digital portals, is growing strongly domestically and is expanding geographically too. See their capital markets day here for more details if you are interested. As such it seemed a good value replacement for S&U albeit probably not one for widow and orphans or the faint hearted. Other than that and the switch into Paypoint from Appreciate I also topped up Morgan Sindall (MGNS) which continues to look unloved and therefore good value despite robust trading and a big order backlog.

For the year as a whole while being down 10% or so in absolute terms and against the market is not great, I don't think it was a bad outcome in the circumstances. Having said that it is pretty terrible in terms of trying to maintain or grow your assets when inflation (the real villain this year) is running at around 10%. On the income side of things the portfolio delivered income that was just ahead of that forecast at the start of the year, although the stocks that delivered it changed along the way. Thus the total income was down slightly on 2021 bumper haul which had more than doubled from 2020's Covid induced cuts. Nevertheless looking back over the last four years since I started recording the income this has grown by 11.6% per annum which is well ahead of inflation over that time period, thus achieving the goal of growing the income in real terms over time. It is worth noting that this income has been lumpy and not in a straight line reflecting portfolio changes and my not targetting a particular yield plus the Covid disruptions to dividend payments.



Summary & Conclusion
A poor end to the year for what was a difficult year for markets and investors as various worries from inflation, rising rates, recession, war and resultant cost of lving squeeze. Despite this the UK market was up slightly thanks to its heavy weighting in beneficiaries of this years conditons such as miners and oil majors. While the portfolio down by just over 10%, which is not too bad in the context of the damage done in Mid Cap & Smaller Companies Indices. Indeed Mid Cap stocks have now underperformed over the whole 7 year+ period. This may well reflect all the Brexit shenanigans, Covid and the current recession but probably means that it may be a good hunting ground for bargains before or once the economic outlook starts to appear less clouded.

Talking of outlook it seems hard to believe that we are truly out of the woods in market terms given we still have what has been the most widely anticipated / forecast recession to "look forward to". We have yet to see the effects of that on corporate earnings and I suspect when we do we might see more downside again. I could of course be wrong as the market does look ahead and discount things ahead of time, but it just seem to me that it is a bit too early to be sanguine about things at the moment. Indeed I have read suggestions that the market does not bottom out until after the first rate cut from the US Fed not just them stopping raising rates and that still seems some way off. Having said that I'm fairly relaxed about being close to fully invested in the CISP as it continues to deliver a decent the level of dividend income, even if the capital value is down a little. Obviously not great in real terms in the context of double digit inflation, but at least there is plenty of value around now as demonstrated by the average P/E of 9.6x & dividend yield of 4.8% from the portfolio. Please see the fact sheet above for more details. Or if you would like to see the full portfolio with comments on news flow and see transactions as they happen  and gain access to the Scores that it is based on then please see here for subscription details.

On a personal note my own returns overall were also around the -10% mark. Within that though it was notable that an account run in line with the Scores continues to do better than one where I trust my own judgement more. Thus seeming to prove the research findings that models often outperform experts and represent a cap rather than a floor for performance. Thanks for reading if you got this far and may I take this opportunity to wish you and yours and your portfolio a good year ahead whatever you are doing and however you choose to invest.

Final admin note on the site & with the model outperformance noted above. Having changed hosts I am struggling a bit with maintianing the site and I get the impression there isn't much interest in the ouput here any way. So I may look at automating more of the site and let the numbers, graphs and fact sheets etc. speak for themselves and have less if any commnetary like this on the site. I will however look at doing more commentary for subscribers via their files etc. As a result the Blog Archive & comments are no longer available or working, but I'm not sure they got used much anyway. If you should wish to get in touch then please use the updated details on the Contact page or follow me & message me via Twitter if you still use that. Happy New Year.