Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors

Fevertree Drinks joins "Mindless Momentum" portfolio just as it shows signs of losing some fizz

Fevertree Indian tonic water
Fevertree: down today but still up 75% over the last 12 months

Last week we looked at how the tiddlers were doing in our “mindless momentum” virtual portfolio strategy and forgot to put a wealth warning on it.

This week we will look at how the big stocks and the middling have been doing under a mechanical investment system that simply buys stocks that have gone up the most over the preceding 12 months.

READ "Mindless momentum" strategy not working for small caps

By way of a quick recap, the “mindless momentum” strategy has been divided into three categories of equities:

  • Stocks with a market capitalisation of less than £100mln – the tiddlers

  • Stocks with a market capitalisation of between £100mln and £1bn – the middlers

  • Stocks with a market cap of more than £1bn – the (for want of a better word) biglers

All we did was look in each category and select the 10 stocks that have risen the most (in percentage terms) in the preceding 12 months.

As with all of the Stockpot virtual portfolios, we included bid/offer spreads (buy at the high price – the offer – and sell at the lower) plus assumed dealing costs of £15 per transaction.

The performance of the tiddlers was catastrophic, turning a virtual £10,000 into £7,664 in less than two months. Over the same period, the FTSE All-Share rose around 4.4%.

The performance of the “middlers” and “biglers” was not as bad but neither category beat the FTSE All Share.

A less than middling performance

The (thankfully) virtual £10,000 invested in the “middlers” has declined by £866, or 8.7%, since March 15.

Only three stocks made a positive contribution – Griffin Mining PLC (LON:GFM), LoopUp Group PLC (LON:LOOP) and Oxford Biomedica PLC (LON:OXB) – while three stocks – Silence Therapeutics PLC (LON:SLN), TMT Investments PLC (LON:TMT) and Versarien PLC (LON:VRS) - lost more than a fifth of their value.

Not surprisingly, the three gainers retained their place in the virtual portfolio while the three big losers mentioned above did not. Yu Group PLC (LON:YU) lost around 14% but retains its place in the portfolio as it is still up 150% over the last year but we bid farewell to Asiamet, Bluejay Mining and StatPro, all of which lost momentum.

The performance of the middlers

Ticker

Name

Cost

Current Value

Profit/ Loss

% change

LON:ARS

Asiamet Resources

£1,000

£925

-£75

-7.5%

LON:GFM

Griffin Mining

£1,000

£1,160

£159

16%

LON:JAY

Bluejay Mining

£1,000

£853

-£148

-15%

LON:LOOP

LoopUp Group

£1,001

£1,168

£168

17%

LON:OXB

Oxford Biomedica

£1,000

£1,158

£158

16%

LON:SLN

Silence Therapeutics

£1,000

£765

-£235

-24%

LON:SOG

StatPro

£1,000

£922

-£78

-7.8%

LON:TMT

TMT Investments

£1,000

£632

-£368

-37%

LON:VRS

Versarien

£1,001

£706

-£295

-29%

LON:ZOO

Yu Group

£998

£858

-£140

-14%

 

  • Cash: £0

  • Market value of current holdings plus cash: £9,146

  • Total profit/loss: £854 (8.5%)

Fresh blood includes two games companies

The plan is to re-jig the portfolio every two months and having offloaded six stocks we had £4,713 in cash, which means we have about £770 cash (after dealing costs) to invest in the new entrants, which are listed below.

The stocks above are listed in order of percentage gain over the last year, ranging from 270% for Frontier Developments to 150% for Games Workshop. Interesting, perhaps, to those of you who are gamers but the former is a computer game developer, best known for the Elite game, and the latter is a tabletop miniatures war-game company, best known for Warhammer 40k.

The big guns pull through after a shaky start

The start of the “mindless momentum” experiment coincided with a stock market correction – the term implies some kind of corporal (or corporate) punishment, and indeed it is for investors.

None of the portfolios got off to a good start but at least the big names came on strong once the market had resumed its upward trajectory with the result that the value of the virtual portfolio had risen from a mythical £10,000 to an equally mythical £10,411.

Plus 500, a star of Stockpot’s Aim Sustainable Dividends portfolio, was also the star performer for the Biglers, rising 45% in two months.

That was enough to offset losses on five of the stocks, the worst of which was the short-sellers’ favourite, IQE plc (LON:IQE), which fell 13%.

Success brings its own reward and six members of the portfolio retain their places: Plus500 Ltd (LON:PLUS), Evraz plc (LON:EVR), Keywords Studios PLC (LON:KWS), KAZ Minerals PLC (LON:KAZ), Ocado Group PLC (LON:OCDO) and Blue Prism Group plc (LON:PRSM).

NMC Health, which rose 2.7% over the period, can perhaps count itself unlucky not to have made the cut – it was just edged out by Anglo American PLC (LON:AAL) – while Softcat PLC (LON:SCT) slipped to 15th place on the list despite rising 7.1% since the start of the portfolio.

In contrast, few tears will be shed over the departure of Hutchison China MediTech Limited (LON:HCM) and IQE.

The performance of the biglers

Ticker

Name

Cost

Current Value

Profit/ Loss

% change

LON:EVR

Evraz

£1,003

£1,097

£94

9.4%

LON:HCM

Hutchison China

£995

£918

-£78

-7.8%

LON:IQE

IQE

£1,000

£872

-£128

-13%

LON:KAZ

KAZ Minerals

£1,000

£1,153

£153

15%

LON:KWS

Keywords Studios

£1,005

£978

-£27

-2.7%

LON:NMC

NMC Health

£981

£1,007

£26

2.7%

LON:OCDO

Ocado

£1,000

£910

-£89

-8/9%

LON:PLUS

Plus500

£997

£1,447

£450

45%

LON:PRSM

Blue Prism

£995

£934

-£61

-6.2%

LON:SCT

Softcat

£1,000

£1,071

£71

7.1%

 

  • Cash: £23
  • Market value of current holdings plus cash: £10,412
  • Total profit/loss: £412 (4.1%)

Selling Hutchison, IQE, NMC and Softcat lifted the cash pile to £3,769, which will be reinvested into Fenner PLC (+99% over the last year), Burford Capital Ltd (+87%), Fevertree Drinks PLC (+75%) and Anglo American PLC (+67%).

Still got the fever?

Had I managed to get this column finished yesterday the Fevertree purchase would have been somewhat more expensive but the trendy mixers maker’s trading statement this morning contained hints that the company’s explosive growth period may be coming to an end, so it will be interesting to see over the next two months whether it still qualifies as a momentum stock.

READ Fevertree says trading is in line with market expectations

John-H.jpg


Register here to be notified of future FEVR Company articles

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use