Monday 23 December 2013

Unlocking Hidden Small-Cap Value in Marwyn Value Investors

One of my favourite hunting grounds for stocks that offer deep value is the small-cap and micro-cap segment of the UK stock market. We can define stocks as small-cap if they belong to the FTSE UK Small-Cap index (over 500 constituents of stocks whose market is typically smaller than those in the FTSE 100 or FTSE Mid 250 indices). Micro-caps typically belong to the FTSE Fledgling index or the AIM market.

Unlike many other stock markets around the world, the UK offers a broad and rich variety of small- and micro-caps that are liquid enough to trade without suffering bid-ask price spreads that are very wide, as long as you are patient when accumulating a significant holding. Typically, these companies are not covered by mainstream investment banking research analysts, and are often simply too small to interest most professional fund managers, who tend to invest in more liquid companies. It is precisely for these reasons that we are able to uncover very interesting value and growth investment stories in this arena. Academically speaking, small- and micro-cap stocks should outperform large-cap stocks in the long-term due to the existence of an “illiquidity premium”, i.e. an investor should be compensated for the risk of holding a stock which he or she cannot sell quickly by superior long-term investment returns from this type of stock.

I believe that one such interesting company is a closed-end fund company called Marwyn Value Investors (MVI). This company, listed on AIM, has a current market capitalisation of £119m (as of 18 December 2013). According to the company’s website (www.marwynvalue.com), this fund “participates in acquisition-led growth strategies by investing in diversified portfolio of European small- and mid-cap businesses”.

Read the rest of my article on Marwyn Value Investors by clicking on this link below to my MindfulMoney article:



Happy reading! And have a very merry Christmas and New Year.

Edmund


Friday 20 December 2013

AstraZeneca: Per Ardua ad Astra?

Hello there,

Today's idea is a single stock idea in the Healthcare space, the UK-based pharmaceutical giant AstraZeneca. 


Recent years have seen Astra experience more than its fair share of problems (loss of patents for key drugs, difficulty in developing new drugs), but now there are several signs that finally matters may be improving for the company.,


Please click on the web link below to read the full story...



As always, I am interested in any comments you may have, so please don't hesitate!

Happy reading and bon weekend,

Edmund

Friday 13 December 2013

Investment Theme: Can Retail Investors Fuel A Further Stock Market Rise?

US retail investors have been favouring stocks over bonds for the last few months, with UK investors similarly bullish on stocks. Continental Europe is a different story, however, with investors there much more cautious and only switching out of cash into bonds. 

But given the trends of the last few years, this rotation out of bonds into stocks could go a lot further yet...

Please click on the link below to read the full article:

Investment Theme: Can Retail Investors Fuel A Further Stock Market Rise?

Key conclusions: Favour the European and Japanese stock markets!

Edmund

Monday 9 December 2013

Investing for the Santa Claus Rally

In the article below, I considers ways to benefit from the festive statistical effect known as the Santa Claus rally. 

Some of you may well have already heard of seasonal effects in the stock markets such as the Halloween effect – that the strongest performance of stocks tends to occur between the beginning of November and the end of April each year. This also gives rise to the well-worn stock market adage: “Sell in May and go away.”

Well, we can be even more specific than that! The best stock market performance of the year, as judged by discrete four-week periods, tends to occur statistically over the last two weeks of December and the first two weeks of the New Year – the so-called “Santa Claus rally”.

Please click on the link below to see the full article with charts on the Mindful Money website:

Investing for the Santa Claus rally

Best wishes for the festive season,

Edmund

Thursday 5 December 2013

Riding the UK Property Rollercoaster

At the risk of seeming a little hyperactive (for an "Idle Investor"), please find below a web link to my latest "Expert Opinion" article on the Mindful Money finance website, on the subject of potential ways to invest in the rising UK property market, without going as far as buying physical bricks and mortar!

Riding the Property Rollercoaster

Please click through to the article, as then I start to build up traffic to my column (hopefully, points win prizes in the end!). As always, your patronage of my column on this website would be much appreciated, as it is a new, exciting venture for me and allows me hopefully a broader platform for disseminating my investment ideas.

PS you can also sign up for a free daily email from the website with their latest feature articles on investing and personal finance:


Mindful Money free newsletter


Thanks a lot for your help,Edmund








Wednesday 4 December 2013

Weekly Global Strategy Screencast: Where are the Financial Markets Headed?

Where are the Financial Markets Headed?December 2013 

This week, I have recorded a screencast of my monthly presentation looking at where my essential financial market indicators are pointed (stock markets, credit markets, financial risk, fund flows etc.). 

Please click on the Youtube link below to watch my 4:30 minute slide presentation with audio commentary (best viewed in fullscreen mode):


Alternatively, you can click on the video below if you don't mind watching the video in a smaller window:


Punchline: Most of my indicators remain positive for risk markets including stock markets for this month.

Happy watching!

Edmund

Buying into the UK's Industrial Renaissance

New "Expert View" Column on Mindfulmoney.co.uk


I wanted to introduce my new column on the finance website mindfulmoney.co.uk, with whom I have started to work.

Buying into the UK's Industrial Renaissance


My first article on the site focuses on why you should look at investing in stocks that are exposed to the UK's industrial renaissance, part of the UK's surprisingly strong economic growth pattern (beating all other major European countries in the process). 


I would ask you to support me in my humble endeavours by clicking on the link below in order to read the article:





Many thanks for your support, all (constructive) comments welcome as always, happy reading!

Edmund

Friday 29 November 2013

Weekly Global Strategy Screencast: Playing "The Internet of Everything" investment theme

Screencast: Playing "The Internet of Everything" investment theme

In this week's animated presentation with audio commentary, I take a look at how to play the "Internet of Everything" investment theme, without falling into the trap of paying very high valuation multiples for social media and e-commerce stocks, i.e. the likes of Facebook, Amazon.com and Linkedin.com. 



Or simply click to watch the video (small window size) below:


For an introduction to the Internet of Everything, watch the Youtube videos below:




Happy investing!
Edmund


Thursday 28 November 2013

Wednesday 20 November 2013

CNBC Europe: Talking about the US economy, small-caps

Click on the link below to hear me talk on CNBC Europe's Squawkbox programme on Friday, 15 November about the US economy, a prospective recovery in investment and why small-caps could continue to out-perform. 


Happy viewing! 
Edmund

Global Financial Market Trends - Animated Slideshow with Audio Commentary

For my views on key global financial trends, watch this 4-minute video clip, which goes through a short slideshow of key market charts, together with an audio commentary.




I hope you find this helpful,
Edmund

Time to Stock Up on Claret?

For those who like to look at alternative investments outside of the traditional stocks, bonds and cash asset classes, here is an interesting value suggestion - Bordeaux red wine!

Now the beauty of this investment, unlike the traditional three asset classes above, is that you have the choice of re-selling the wine later on as an investment, or perhaps more interestingly, you can enjoy it yourself, with a good meal and good friends for instance!

The price of fine wines on the Liv-ex wine exchange has fallen steadily since early this year, and now sits over 30% below its mid-2011 high (see chart below). 

Fine Wines becoming More Affordable...
 Now, I would also point out that 2011 and 2012 red Bordeaux vintages, while perfectly drinkable of course in the main, are nowhere near as good in general as the exceptional 2009 and 2010 vintages, according for instance to the wine merchants Berry Bros. & Rudd. 

2009 and 2010 Red Bordeaux - 10/10!

(For more details on wine vintages, and World Wine Vintage information, look at:
Berry Bros. Wine Vintage Table).

So my non-stock market recommendation of the day: Go stock up on affordable 2009 and 2010 French red Bordeaux vintages, as they still represent good value given the slowing growth in demand from the likes of the Chinese consumer. 

For those looking to buy a good Bordeaux Superieur or even a Clairet (a type of Rosé), I would point you to a wine grower whose wine I have tasted and bought in the recent past, that of Chateau Fontcaille Bellevue. 

This chateau is owned by royal photographer Anwar Hussein and his charming wife Caroline, and produces some very good Bordeaux Superieur reds and an excellent Clairet, perfect for drinking before dinner or with fish or chicken dishes.

You can find details on Anwar and Caroline here:

and details on his reds here:

(okay, advertisement now over!).

Good luck with your investing, 
Edmund


Tuesday 29 October 2013

Dividend funds: caveat emptor!

Market Indicators Remain Positive

With the US S&P 500 stock index hitting new highs, we might ask ourselves if shares are finally starting to become expensive, and vulnerable to a near-term correction. Checking a number of my favourite market indicators, conditions look to remain favourable for stocks and shares. 

1. US advance-decline indicator hits new highs

The cumulative advance-decline indicator, that measures how many stocks have gone up versus those that have gone down each day and adds the up-down balance up over time, continues to make new highs. This points to good market breadth, i.e. that the market is being driven by a large number of stocks rising. If this were not to reflect a similar pattern to that for the benchmark stock indices, then I would be concerned. But no worries here...

US Advance-Decline Index Remains very Bullish

 2. US Value Line Geometric Index Also Very Strong

A second measure of market breadth is the Value Line index, which looks at the performance of the average stock in the US. Again, if this were not to be making new highs at the same time as the benchmark stock indices, I would be concerned. But once again, things look good...
US Value Line Index Also In A Bull Trend

3. European Industrial, Bank Stocks Still Performing Well

In an economic recovery scenario, both industrial and financial stocks should perform well, reflecting the benefit of a stronger underlying economy for profits in both these cyclical sectors. Looking below, we can see that European Industrial (SXNP) and Bank (SX7P) sectors are still in strong uptrends, and close to new highs. 

European Industrials, Banks Close to New Highs

But High Quality Dividend Stocks Now Expensive In the US

Interestingly, stable dividend stocks have in particular started to become expensive as investors have looked for yields outside of the traditional bonds and cash sources, given the very low rates of interest currently on offer from both asset classes. 


US Dividend Aristocrat Dividend Yield at record low
The chart above represents the US dividend aristocrat ETF, which only holds US large-cap companies that have raised their annual dividend consistently each year over the last 25+ years. Members include healthcare companies like Johnson & Johnson, and consumer staple companies like Coca-Cola.  All very high quality companies, but now increasingly expensive, only offering a 1.8% dividend yield now as opposed to nearly 2.5% at mid-year. Clearly investors are looking for a better yield than they can get on bonds or cash, but without taking big risks and thus preferring to invest in companies that offer relative stability. 


Focus more on Small-Cap stocks

October has been a pretty good month for Small-Cap stocks, with both UK and US small-cap indices continuing to outperform the large-cap benchmarks and rising in a strong, steady pattern. Both small-cap indices have gained nearly 5% over the last month, continuing to forge new all-time highs. 

UK, US Small-Cap Indices In Steady Uptrend

Favour Industrials, Small-caps; Beware Overvalued Dividends

I remain a big fan of ETFs exposed to small-cap stocks such as the iShares MSCI UK Small-Cap ETF (CUKS) and the iShares S&P Small-Cap 600 ETF (ISP6). You could get exposure to Small-Cap stocks in Europe overall via the db x-trackers MSCI Europe Small-Cap ETF (XXSC). With capital expenditure trends improving, European Industrials also remain a good area for investment at this moment: db x-trackers STOXX 600 Industrial Goods ETF (XSNR). 

But I would be wary of continuing to chase large-cap dividend stocks and indices higher at this point, as many of these stable growth stocks are now sitting at relatively expensive valuations, particularly in the US.  

If you want to buy exposure to European dividends, it would perhaps be better to look at a high-yielding sector ETF that is performing well, such as the STOXX Europe Telecoms ETF (offered by db x-trackers, Lyxor amongst others) rather than chasing what seems to me to be expensive dividend growth, at this point.  

Friday 11 October 2013

Banks Breaking Higher In Spite of US Political Roadblocks

Given the drag to US economic activity from the ongoing US government shutdown, and the looming need to raise the US debt ceiling (before the US government runs out of money!), I am surprised to see that US investment banks and broker-dealers continue to do very well, with hardly a pullback in sight. 


US Broker-Dealers Bounce off 3m Moving Average


Boosted by Retail Investors Buying Stock Funds

This particular index comprises investment banks such as Goldman Sachs and Morgan Stanley, stock and commodity exchanges such as the CME, ICE and NYSE Euronext, and electronic trading platforms with as TD Ameritrade and E*Trade. They are all clearly benefiting from the current bull market in stocks, and the swtch by retail investors away from bond funds back towards equity funds, e.g. in the form of buying equity ETFs. 


Money Still Flowing Into Equity ETFs

European Financials Lead the Stock Market

In Europe, the same trends can be seen, with both the European Banks and Insurance sectors at or breaking new highs:


European Banks break a new year high

European Insurers also hitting a new high
You might argue that financial markets are perhaps being a little too sanguine over the risk of a US government debt default; the accepted consensus seems to be that a US default would wreak complete havoc on the US and global economies (not to mention global financial markets), and thus will be avoided by a combination of the US Treasury and Federal Reserve at all costs. 

Nevertheless, the fact remains that volatility remains historically low in spite of the political deadlock, and investors are still stuck looking for somewhere to invest their savings where they can garner a half-decent return, which is still leading them back to stocks and shares. 


Implied Volatility Still Close to Multi-Year Lows

Personal caution

I personally would rather be a seller into this rally than a buyer, as I believe that any eventual debt ceiling deal in the US could result in the stock market cooling off, as it is often better to "buy on the rumour, but sell on the news"

That said, the US and European Banks and Insurance sectors still contain many companies that look attractively valued when looking at P/E, dividend yield or price/book valuation metrics, at a time when the US stock market overall could be argued to be already fully valued (as was argued recently by the famed investor Julian Robertson in a recent CNBC TV interview: Julian Robertson interview).

So what to do? I am still heavily invested in the UK, European, US and Japanese stock markets for now, but I must admit, I am looking to sell down positions sooner rather than later. After all, we are still not even halfway through the month of October, which has proven a pretty volatile month for stock markets in the past (see previous post for details)...

So invest in banks and insurers if you are confident of a successful resolution to the US debt ceiling issue, and if you believe that upcoming quarterly earnings releases from giant US banks such as JP Morgan and Wells Fargo will not disappoint expectations. 

Good luck,
Edmund

Wednesday 2 October 2013

How Much Longer can Small-Caps Outperform?

I have been pleasantly surprised this year to see small-cap stocks outperforming their large-cap cousins in the UK, US, and Eurozone pretty much all year long. As a simple example, while the UK FTSE-100 benchmark index sits close to its 3-month lows, in contrast the FTSE Small-Cap index is only 2% off its all-time high!

Small-Caps around All-Time Highs!

If we look at three small-cap indices, the FTSE UK Small-Cap, the MSCI Europe Small-Cap and the S&P 600 Small-Cap, we can see in each case that small-caps are still very close to their all-time highs. 

UK Small-Caps 2% of all-time highs

MSCI Europe Small-Caps also within spitting distance of highs

Last but not least, US Small-Caps Breaking Higher
Note the last chart, where US small-caps are breaking out to a new all-time high despite the obvious question marks in the US about political gridlock in Washington. 

Economic Momentum Helping Domestic Stocks

One key indicator that is positive for domestic economic momentum in the US is the recently-released national ISM manufacturing survey: the reading for September clearly outperformed expectations with a solid rise to levels not seen since early 2011. 

US manufacturing showing strong positive momentum
This is equally true of the UK economy, where manufacturing is also seeing an accelerating rate of expansion:

UK manufacturing also returning to early 2011 levels of growth
So, this is all very well, but it could well be argued that this good macro news is already reflected in the current price of small-caps: more importantly, where next?

Seasonal Performance Suggests Continued Caution

Interestingly, looking at the case of Small-Caps, it would seem that the worst month of the year for performance historically has been September (which was actually decent for small-caps this year): 

September has been the worst month for small-caps

But I wouldn't assume from the chart above that the worst is past, now that we are into the month of October. After all, you need also to consider the following chart:

Small-Caps: Worst months have been August-October
So despite the strong upwards momentum of small-cap indices and the favourable macro following winds, I would not conclude that all will be plain sailing necessarily this month for small-caps. 

So what to do? Stay long small-caps, but watch carefully!

Let us not forget that, in the long-term, mid- and small-cap  stocks in the UK and US have tended to outperform the FTSE-100 and S&P 500 benchmark large-cap indices by quite a distance, albeit at the cost occasionally of higher investment risk at times of recession/crisis. 

One market indicator I like to keep a close eye on in the US at times like this is the cumulative breadth (advance-decline) indicator for US stocks (from Barrons) - so far, this looks fine, with the cumulative breadth line still advancing wekk-on-week. If this were to start to fall, then I would get worried about a potential correction...

US market breadth still up, giving comfort to small-caps


So remember that October can still be a terrible month for small-caps; stay invested in small-caps (as I am), but then watch the small-cap indices very carefully for any signs of impending market correction... 

My favourite UK small-caps for the moment: British Polythene (BPI), T. Clarke (CTO), Communisis (CMS), Inland Homes (INL), James Latham (LTHM) and Workspace Group (WKP). In France, I like Manitou (MTU) and Trigano (TRI). But as always when investing in single stocks, do your own research!

Hang in there,
Edmund

Tuesday 1 October 2013

Should we invest in Stocks in October, Despite Seasonal Risks?

Stay in Stocks in October?

There are a number of reasons for avoiding risky assets like stocks in the month of October, ranging from seasonal to geopolitical to fundamental:

  1. Seasonal: Historically, September and October have traditionally been the most volatile months of the year for stock markets worldwide, the months when most sharp stock market falls have been recorded (think Sept-Oct. 2001, Sept-Oct. 2008). Yes, stock markets have generally made small advances over the month of September, and have done well over the year to date. But isn't that precisely the reason for locking in profits now, at the beginning of October?
  2. Political: The partial US government shutdown over the lack of agreement between the Democrats and Republicans over a the US budget could cause further volatility in the US economy and thus in financial markets. Thus far, markets seem to have taken these events in their stride (VIX volatility index close to a year low at under 15), but can we expect this relative calm to persist if no agreement is reached soon?
  3. Fundamental: Let's not forget that the US Federal Reserve, having positively surprised the markets by not beginning the infamous "taper" (i.e. not reinvesting the proceeds of maturing bonds back into the US bond market) in September, could nevertheless begin this tapering process very soon. This was even hinted at by St. Louis Fed President James Bullard, who intimated that the taper might even begin in October (i.e. this month!). So the relief rally we have seen in bonds may not last much longer...

But some reasons to stay the course with stocks (for now)

A key reason to remain invested in stocks at the beginning of October is the basic fact that established uptrends in the major US, European and Japanese stock markets remain intact. Each stock market sits above its own 3-month and 6-month moving averages, and has not broken the general pattern of higher highs and higher lows. 

EuroSTOXX index in clear uptrend
Secondly, while it is true that September and October have contained some painful periods of stock market falls, we should not ignore the fact that, on average, the UK stock market has generated an average 2.1% total return (price change + dividends) over the two-month period over the 23 years from 1990 to 2012. 

UK stock market has gained 15 times out of 23 Sept+Oct periods

Indeed, over the past four years we have seen positive 2-month returns on each occasion... So from this simple statistic, I would say that the jury is out on whether these months should be completely avoided or not. 

Be pragmatic, use a stop-loss!

My pragmatic approach to investing in stocks at this time of year is relatively simple: I favour using liquid index-based ETFs rather than individual stocks, as then I can easily manage the level of risk in my portfolio by selling or reducing only a few investments. I also put in place a relatively tight stop-loss, so that I reduce my stock market investments before losses become painful. 

But, for this month of October, my ETF-based investment strategy is 100% invested in stocks, via UK Small-Caps (ETF code: CUKS), Euro Low Volatility stocks (IMV), US Small-Caps (ISP6), Emerging Markets Low Volatility stocks (EMMV) and FX_hedged Japanese stocks (IJPH). But in each case, I will be closely monitoring weekly moves, and selling them if they exceed the stop-loss levels I have set in place as of today. 

Year-to-date performance of my re-christened STAS

On a final note, I just wanted to point out that my asset allocation trending system STAS (Signal-driven Tactical Allocation System) has now gained 15.1% net of costs over the year to the end of September, including a monthly gain of 1.3% for September alone despite being 40% invested in cash. So far, still so good...



Thursday 12 September 2013

Is The "Great Rotation" Finally Appearing?

Bond prices fall (and long-term interest rates start to rise)

Now that government bonds have been falling for a number of months (with bond yields rising inversely to the falling price), as global economic growth prospects have steadily improved, and also as investors grow increasingly nervous of any change in monetary policy from the US Federal Reserve, potentially slowing the rate at which they currently buy US government bonds (under their Quantitative Easing program) from the US government. 

1. Euro, US government bonds have lost over 5% since April this year
Up to now, the Fed has successfully helped to drive long-term interest rates both in the US and indeed worldwide to new historic lows, in their attempt to support growth in the US economy. However, now all the talk in financial markets over the last couple of months has been about a shift in monetary policy towards "tapering", i.e. not buying quite as many US bonds as they have done up to now, in an effort to begin weaning the US economy off the "easy money" drugs before it becomes too much of a permanent habit. 


US investors take note, respond by pulling money out of bond funds

US retail investors have responded to this expectation of slight change in US Fed policy by selling bond funds in size. 

2. Finally, retail investors start to sell bond funds
Interestingly, the same retail investors have tended to put money into equity funds, chasing the upwards momentum in US and foreign stock markets. 

3. But they continue to put money into equity funds
As economist Ed Yardeni comments: 

"over the past 13 weeks through the week of August 28, the Investment Company Institute estimates that bond funds had net cash outflows totaling $438 billion at an annual rate. Over the same period, equity funds had net cash inflows of $92 billion at an annual rate. I wouldn’t describe that as a “Great Rotation” just yet, but it could be the start of a big swing by retail investors into equities."

What does my Multi-Asset Trending System (MATS) have to say?

My proprietary multi-asset trending system, that chooses between equities, bonds and cash once per month in a number of different regions, is invested 60% in equities (UK small-caps, Euro low volatility, Japanese currency hedged shares) and 40% in cash. Note: 0% is invested this month in government bonds, highlighting the poor trend in bond market performance over the past few months. 

Why listen to this systematic (i.e. the asset classes are chosen using a simple mathematical model rather than by yours truly!) investment approach? Because it has gained over 15% net of trading costs in the year to date, that's why! 

The Main Risk: That there is more to come out of bonds, into equities

Judging by ETF flows over 2013 to date, the risk is that this reversal in flows in bonds funds could turn from a trickle into a flood: looking at global bond (fixed income) Exchange-Traded Fund (ETF) flows, this year to date has still been positive to the tune of nearly $19bn, on top of strong positive inflows over 2010-2012. 

Source: BlackRock4. Bond ETF flows have been strongly positive since 2010.

Conclusion: Equity Income Funds look set to attract bond refugees

We can see from the following chart that UK investors have also been putting greater amounts of cash into equity unit trusts this year, while flows into bond funds have been, in contrast, stagnant. 

5. UK retail investors putting increasing amounts into equities too...
My personal theory is that retail investors will look to replace the income generated by their bond funds with equity income funds instead; i.e. that they will buy funds focused on good dividend-paying names in the UK and Continental Europe. 


6. UK Dividend Aristocrats ETF surges upwards
One of my personal favourite ways to buy into solid dividend-paying names without taking too much risk is via the SPDR UK Dividend Aristocrats ETF (UKDV). This ETF focuses on dividend-paying companies in the UK that have managed to raise their dividend consistently each year over at least the past 10 years. As a result of this dependability, this group of dividend payers have the happy side-property of having on average lower volatility (i.e. less risky) than for the overall market. On top of that, it is also an easy way to buy into the outperformance of value strategies over the long-term.

If you want to be more sporty with your investment, then I would look at a portfolio of UK mid-cap and small-cap companies that have not only raised their dividend consistently over the past few years, but that offer a decent dividend yield (over 3%, thus much better than government bonds or cash rates) combined with strong price momentum. 

You might want to look at: Sports Direct (SPD), Tribal Group (TRB), Chesnara (CSN), Aviva (AV), James Latham (LTHM) and ICAP (IAP) as good examples of stocks that fit this description. 

Good luck with your investments,
Edmund




Monday 9 September 2013

Back to School! What a relief! Japan, Small-Caps still motoring ahead

Back at the beginning of August, I noted how a number of clear investment trends were still in evidence, most notably:
  1. The outperformance of Small-Cap companies in the UK, Continental Europe and US;
  2. The stock market recovery in Japan following a sharp sell-off;
  3. The outperformance of the European Retail sector (largely supermarkets) versus the broad market.
Now post the Back-to-School period, where do we stand on these three trends?

1. Small-Caps: Still Breaking New Highs

UK, European and US small-cap indices continue to break new year highs, in the process outperforming benchmark indices in the various regions:

UK Small-Cap ETF Still Hitting New Highs, Beating FTSE 100 hands down

Given the strong rebound in economic indicators such as manufacturing confidence indices, I believe that this small-cap outperformance trend still has legs, and so I remain happily invested principally in UK small-cap companies like Tribal Group (TRB), Inland Homes (INL) and Sepura (SEPU).

2. Japanese stock market boosted by GDP growth, 2020 OIympic Games


The Japanese stock market story also remains intact, boosted by a surprisingly strong 3.8% GDP growth print for Q3 2013, and the awarding of the 2020 Olympic Games to Tokyo. 

Nikkei Index Maintains Health Lead Over MSCI World Index

Again, I remain firmly committed to the Japanese equity market story, and keep my MSCI Japan (GBP hedged) ETF (IJPH) for now.


3. Retailers Better Other Defensive Sectors, Overall Stock Market

And thirdly, the back-to-school period has led to healthy gains for the European Retail sector, most notably from supermarkets that tend to benefit from a boost in sales of school clothing and the required stationery for the new school year. In the process, retailers have left not only overall stock market indices for dead, but also other defensive sectors like Food & Beverages (see below). 


European Retail Far Outstrips the Defensive Food & Beverage sector

I remain a fan of a number of Retail stocks in the UK as a way of playing this bullish trend, including Sports Direct (SPD), Marks & Spencer (MKS) and Dixons (DXNS).

In the next posts, I will have a look at a number of new themes and trends, but for now, stick with these three good'uns. 

For now, as the French say, Bonne Rentrée (literally, "good back to school")!

Edmund



Sunday 4 August 2013

Smallcaps forge ahead

Yet again, I am pleased to report that stock markets have made further progress through the month of July, led by smallcaps yet again. 

UK Smallcaps breaking new highs

Japanese stocks have also recovered to a surprising extent, with a promising uptrend looking to be re-established once again.

Nikkei index rebounds off the 100-day moving average

On the sector front, the Insurance and Retail sectors have shown the most resilience in recent weeks, surging to new 52-week highs and leading the way within European stock markets. This to some extent reflects the improving economic fundamentals in Europe, reflected in the surprising recent fall in the European unemployment rate and corporate reports of better European business activity.

European manufacturing activity is picking up


European Insurance sector maintains a strong uptrend

And Retail stocks are also threatening to set new highs too

Current Insurance stock favourites which offer a tempting combination of value (e.g. high dividend yield, low price/book value) include Delta Lloyd (DL), Aviva (AV) and AXA (CS). In Retail, I continue to favour UK mid- and small-caps such as Sports Direct (SPD), Darty (DRTY) and Inchcape (INCH).

Overall, while I remain cautious given the strong stock market advance since November of last year, there are several pockets of positive momentum that can still be exploited, in particular in the mid- and small-cap space. 

Best of luck, 
Edmund