Last year saw some pretty spectacular gains in the UK stock market, with confident investors driving up the prices of small and mid-cap shares in particular. But 2014 got off to a much more cautious start and a correction in the second quarter has blown some of the froth off those prices. That proved to be a drag on the performances of some of Stockopedia’s 60-plus guru inspired investment screens. Not only have they generally seen a fall in the number of shares qualifying, but last year’s market-beating performances have come under pressure too. (If you want to review the aggregate performance charts click here).
Since the turn of the year, the FTSE 100 has drifted up by around 0.5%, while the FTSE SmallCap XIT is down by 5.3%. Over the same period, the GuruScreen Composite has edged the market by a couple of percent and still remains well ahead over one year. But make no mistake, 2014 has been hard going for investors all round.
Value stocks still hard to come by
These portfolios were last rebalanced in mid-March and it was clear then that value investing strategies were having a tough time. That continued in the second quarter because many of them were not holding good sized baskets of stocks. Ben Graham, the father of value investing, was an advocate of healthy diversification as a means of ensuring that winning stocks more than make up for the losers. He’d have baulked at the slim size of some of these portfolios during Q2 but the good news is that the some screens are slowly filling again with candidate stocks as prices cool down.
But while many strategies have struggled, there have been some excellent gains in individual value stocks during the period. The David Dreman Low PE Screen caught a wave on Aberdeen Asset Management (up 17.8%) and the John Neff Value Screen saw an impressive riser in Caretech Holdings (up 19.5%). Probably the best overall performance was the well-diversified Neglected Firms Screen (up 10.5% over six months), which looks for under-researched and potentially undervalued small caps.
Quality holds up under pressure
After a consistently strong performance over the past two years, the Screen of Screens (SoS) portfolio fell by 1.6% during the second quarter…
