Stock market investments often outperform over the winter months, research shows. For this reason, Moneywise’s parent company - the execution only stockbroker Interactive Investor - has launched two winter portfolios that run from 1 November 2017 to 30 April 2018.
The two portfolios require investors to buy a basket of company shares and hold them throughout the winter, selling them on 30 April. Buying and holding these portfolios during the winter months only, has, historically, generated far better returns than if you had stayed invested all year round.
Interactive Investor has trawled the past 10 years' worth of data to find the five most regular outperformers for its consistent portfolio, which would be a good place to start if you’re new to investing directly in companies.
Investing in this basket of shares for the past decade would have generated an average annual return of 18%. The FTSE 350 benchmark index averaged just 3.5%.
The Interactive Investor Consistent Winter Portfolio 2017/18 comprises:
Heat treatment engineer, Bodycote (BOY)
Irish building materials specialist, CRH (CRH)
Speciality chemicals firm, Croda International (CRDA)
Hotelier, InterContinental Hotels (IHG)
Caterer, Compass Group (CPG)
The Share Centre’s top buys
Meanwhile, Ian Forrest, investment research analyst at rival stockbroker The Share Centre, has picked four companies listed on the London Stock Exchange that he thinks could benefit from the impending winter months:
International Consolidated Airlines (IAG)
He says: “International Consolidated Airlines (IAG) is looking to capitalise on the many upcoming festivities with one if its main brands British Airways already tempting its customers to embark on ‘winter adventures’. The group is appealing to the masses by offering city trips to Europe to explore enchanting Christmas markets as well as endorsing longer distance holidays for those looking to get some winter sun. Business could take-off for the company as a result.
Despite current challenging times for airlines, including adverse currency moves, IAG recently reported increases in both operating profit and revenue. Dividend payments have restarted and are expected to rise above inflation over the next three years, and the prospective dividend yield of 4.1% is above average. As a result, IAG could be a suitable option for higher risk investors seeking growth, primarily due to growth from existing and new airlines.”
“A steady stream of blockbuster films has helped drive growth at cinema operator Cineworld, and the forthcoming festive releases of films including Star Wars: The Last Jedi, a‘ re-imagining’ of the 1995 film Jumanji and a short Disney film starring Olaf from the phenomenon that was Frozen, should boost this further. The group has in addition, been increasing retail sales by introducing outlets including Starbucks at its site, so will hope that cinema goers opt for an Eggnog Latte to accompany their experience,” says Mr Forrest.
He adds: “Cineworld is one of the leading cinema groups in Europe with 2,115 screens across 226 sites. Interested investors should appreciate its good track record of growth through both acquisitions and organic means. Moreover, strong cash flow is helping to lower debt, increase dividends and fund further expansion. As a result, we believe the group could be an option for medium risk investors with a balanced portfolio.”
Mr Forrest comments: “The NHS is once again reiterating the importance of keeping healthy this winter given that it identifies how some health problems such as asthma, sore throat and cold sores are triggered or worsened by cold weather. Research based pharmaceutical company GlaxoSmithKline develops, manufactures and markets vaccines, prescription and over the counter medicines, as well as health related consumer products, so could benefit as people take the necessary precautions to stay in good health. Indeed, 30% of its revenues come from asthma related products.
The defensive nature of the sector and the stock, combined with the competitive yield which is in excess of 5% paid to investors, makes this company a core holding for many portfolios. Yes, the share price fell back recently on fears that the dividend could be at risk if the group makes significant future acquisitions, but this could prove a good entry point for new investors. Future prospects should be helped by new products, diversification (consumer healthcare, biotechnology) and increasing exposure to emerging markets. This is a group suitable for income seekers willing to accept a lower level of risk.”
“Food and drink gifts are always a favourite at Christmas time, as is a festive tipple or two with friends, families and colleagues, so it is likely that global alcoholic beverages group Diageo could benefit. The company has a wide product range including many well-known brands such as Johnnie Walker, Guinness, Smirnoff, Baileys and Captain Morgan, with operations in 180 countries," says Mr Forrest.
"A large proportion of Diageo’s sales come from the US and Diageo is well placed for increased demand in the country. Investors should also recognise that the group now has full control of USL in India, its most important emerging market, and prospects there remain encouraging. Diageo continues to see improvements courtesy of cost-cutting, it has a reasonable dividend yield and the strength of its brands positions it well above the rest. As a result, we would suggest it is suitable for lower risk investors with a balanced portfolio.”