It would be nice to skip past the performance of the stocks we selected for the 2022 edition of this feature. In aggregate, our five portfolios of 10 shares produced a negative total return of 20.8 per cent between 6 January and 20 December. The broader market may have had a rough time too, but our underperformance was hefty, and badly hit by negative total returns from four-fifths of picks
As an advertisement for this year’s ideas, it’s hardly what we would have hoped for. But without an element of reflection, all investing would be scattershot and doomed to repeat past mistakes.
How then do we explain 2022’s bloodbath? A couple of factors spring to mind.
The first is the relatively resilient performance of the FTSE All-Share, which served as the benchmark for two of our portfolios. This performance was not neatly dispersed across its constituents, but heavily weighted to a minority of large cap value stocks which benefited from higher interest rates or commodity prices. That also meant that ‘value’ worked as an investment strategy only if it went big on a handful of unfashionable cyclical sectors.
A bigger issue was the framing we brought to last year’s selections. One portfolio – the Bounce-Back shares – was based on what with hindsight proved to be an overly rosy assumption of the UK economy and consumer. Covid-19 worries might have been receding, but two stronger headwinds, in the form of inflation and monetary tightening, were bearing down. Those developments also did for our four other portfolios, which were skewed towards pricier ‘quality’ and ‘growth’ names – much more so than our more successful weekly ideas ('Ideas of the Week Review 2022', IC 30 Dec 2022).
As a result, the portfolios lacked contingencies. This year, with many of 2022’s threats still around, we have taken a more rounded approach. Though we have not given up on growth or long-term trends, we have hedged our bets with a more value- and income-oriented selection of shares.
| 2022 Performance | |||
|---|---|---|---|
| Ideas of the Year | Index | Out/underperformance | |
| Best of British | -16.8% | -1.6% | -15.3pp |
| Bounce-Back Shares | -22.9% | -1.6% | -21.3pp |
| Small Cap Stars | -34.3% | -22.5% | -11.8pp |
| World's Best Shares | -10.8% | -7.2% | -3.6pp |
| Megatrends | -19.1% | -7.2% | -11.9pp |
| Average | -20.8% | -8.0% | -12.8pp |
Source: Refinitiv Eikon Datastream. Total return, 6 Jan to 20 Dec | |||
| Total Return 6 Jan 2022 to 20 Dec 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Best of British | Bounce-Back Shares | Small Cap Stars | World's Best Shares | Megatrends | |||||
| Sse | 10% | Euromoney | 58% | Clipper Logistics | 17% | McDonald's | 13% | Linde | 10% |
| Relx | 4% | Xaar | -6% | NCC | -12% | Visa | 5% | Vestas Windsystems | 7% |
| Aveva Group | 4% | NewRiver Reit | -9% | Michelmersh Brick | -26% | Charles Schwab | -1% | Thermo Fisher Scientific | -5% |
| Rentokil Initial | -5% | HSS Hire | -14% | YouGov | -33% | Nestle | -4% | Microsoft | -13% |
| Experian | -17% | Pendragon | -19% | Gamma Communications | -34% | Inditex | -6% | ASML | -14% |
| Auto Trader | -27% | BT | -34% | Integrafin | -47% | Costco | -7% | Adobe | -27% |
| Croda International | -30% | Easyjet | -46% | Impax Asset Management | -48% | Estee Lauder | -25% | Alphabet | -27% |
| Halma | -31% | Frontier Developments | -46% | Treatt | -50% | Intuit | -26% | Nvidia | -36% |
| Rightmove | -32% | AO World | -47% | Hilton Food | -51% | Nike | -28% | Amazon.com | -42% |
| Vistry Group | -45% | Boohoo | -67% | XP Power | -60% | Ebay | -30% | Illumina | -44% |
| FTSE All-Share | -2% | FTSE All-Share | -2% | Aim All-Share/Smallco | -23% | FTSE World (£) | -7% | FTSE World (£) | -7% |
| Best of British | -17% | Bounce-back shares | -23% | Small Cap Stars | -34% | World's Best | -11% | Megatrends | -19% |
| source: Refinitiv Eikon Datastream | |||||||||
