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")!


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