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Tales of woe in the global stock markets have made me increasingly nervous about checking my portfolio performance as 2022 chugs on. It’s never nice to open your platform and see a sea of red, and it’s especially painful to witness the collapse when there is no obvious remedy. Sentiment is changing and it is hard to know how a new prevailing market force will fare in the the 2020s - retail investors played a far smaller role in the stock market narrative last time value was in its prime.
I take comfort in the fact that I am far from alone in my despondence. Message boards reflect the gloom which has settled on markets, both in the UK and overseas; fund managers are failing to live up to their hype of recent years; and even the stock pickers who have deftly navigated the changing sentiment of the last few months and benefited from the relative outperformance of commodities and energy companies are only sitting on lukewarm returns.
There is also comfort to be found in the knowledge that I couldn’t have done much better - knowledge that was reinforced by Stockopedia’s analysts at the end of last week in an interesting (if not mildly depressing) chart:
As of 11 May, 50% of all of the companies listed on the London Stock Exchange were more than 30% off their 52-week-high, while only 14% were within 10% of those highs. Momentum is certainly not prevailing right now.
The trends are mirrored in the performance of the three key factors which contribute to the Stockopedia StockRanks. In the UK, the companies with the highest ValueRank - a collection currently dominated by basic materials, industrials and energy stocks - have been the strongest group of performers. It’s true, even this chunk of the market has not broken into positive territory yet in the year to date, but its performance is some way ahead of the stocks with the highest Quality/Momentum or Growth StockRank. The two forces which stoked the world’s recent bull run have had a terrible 2022, and the companies with the highest QM and Growth StockRanks have registered a decline of 22% and 35% respectively in the year to date.
But if we can look past the immediate portfolio pain, investors in the UK with a long-term investment horizon could find comfort in recent trends. Value is Britain’s bread and butter. After more than a decade of flashy technology leading the market, it seems like good-old industrials might be back in style. And therein lie opportunities.
About Megan Boxall
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I feel your pain as I’m sure many people do at the moment. Even value shares including energy stocks are mostly catching up on losses they incurred earlier in their cycle, so are still below their long term highs.
A well trotted out argument from investors more famed than me, would argue that the time to seek out buying opportunities is when everyone else is running for the exit. I suspect that being a fellow stockopedia subscriber, we are all now avidly seeking out some great investments to buy.
An interesting article in the FT this weekend gave a small bar chart listing the sectors that outperformed in then 70s/80s period of high inflation and low growth. The best included transport, construction, energy and financials. The worst performers were consumer cyclicals, telecoms, utilities, autos/parts and engineering.
I was surprised that utilities and telecoms were poor and construction was good but I guess that’s what makes investing such a hard topic to master. Logic seems to go out of the window sometimes.
Agreed and thanks for sharing - all very painful in 2022 so far. I've stepped away from buying at this stage as I do still feel we have 2-3 months before things bottom out, but I might be very wrong.
Value shares is the place to be for now, and there is some excellent dividend yield on offer. I am keeping invested in such, but also holding a high cash percentage if things really get nasty and we get to a capitulation moment.
Macro headwinds are truly awful for a few months to come, so its difficult to see things getting better for the market until recession has been confirmed. I fear that the economic forecasts are woefully inaccurate and Q2 GDP numbers (real) will be dreadful. The choice is between runaway inflation or a global recession, and I think the latter is the better option. Either option will break the market.
The article is called Survive inflation by balancing your portfolio.
And the link is https://www.ft.com/content/284...if that doesn’t work then Google the article title and it should come up.
Doom and gloom only for stock pickers the FTSE 50 day moving average is up over a year 6820 to 7400 and YTD 7280 to 7400 the All share is up slightly over a year and down 100 points YTD. I am down about 20% over the last year which is the worst result compared with the All share I have had in over 30 years by a margin.
I don't see any good news for a long time peoples spending power squeezed by higher Taxes, High interest Rates, Hugh increases in the cost of heating their home, the cost of food going up with more to come ect.
I have realised my losses everything in my SIPP and ISAS is in Solar, Wind. Power, Infrastructure and Property all paying high dividends everything I own directly is in Cash and I will wait until I see some visability in what is happening in the economy and the market in the US and here starting to move up before I move back in.
Good Luck to you all (and to me)
This presentation is epic. The balls of Stuart Kirk, HSBC's Global Head of Responsible Investments, to present on the ridiculousness of climate change doom porn at FT's Moral Money conference is really something. Refreshing break from group think. 16 minutes. Well worth it.
I like the clarity and thought process in this overview of the UK market and recent returns. However, I find it strange that the conclusion leads to the fact that after all the bloodbath, the LONG RUN opportunities still lie in the industrials. In fact, quite I find the assumptions & facts in this article to lead me to opposite - I believe that the long run alpha creating opportunities lie in the growth companies which can show operating leverage in operations by going FCF positive, maintain or grow margins and expand customer spend which diminishing customer concentration, all at a currently compressed/compressing valuation. Companies like £DDOG (Datadog), for example are on the cusp of this trend, at 40% of its peak, and continue to maintain monument as enterprises and medium sized enterprises invest moreso in their data analytics to help offset other cost pressures. I'd love to learn about UK based companies that exhibit these characteristics too!
Hi Roodini
Thanks for the link, a nice alternative view. I enjoyed the vid.
Regards
Howard
Interesting article. Thank you. I have recently sold half of my US tech stocks (Googl, Alphabet and Microsoft) which have done me very well over the last few years to buy miners. I am glad to see that miners generally have high stock ranks and pay extremely good dividends. So, fingers crossed, it was the right rebalancing, even though it was difficult to sell such good companies.
Yes, my trend following portfolio is of course suffering, but nowhere near as badly as the US markets. Just need to hunker down and brace for a difficult year or two before calm is restored.
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agree value investing time: Contourglobal (LON:GLO) Bank of Georgia (LON:BGEO) and Arbuthnot Banking (LON:ARBB) for me