Stellar’s ESP AiM Portfolio outperforms the benchmark – yet again
In this testing environment, the Stellar ESP AiM Portfolio Service has been reporting positively once again in 2019, thus reinforcing our analysis of our portfolio’s quality relative to the wider market.
Whilst economic and political uncertainty have continued to affect the UK market space, feelings of alarm have gradually subsided and our activity in the AiM market over the past 12 months has paid dividends to our investors.
Keyword Studios – making gains in the gaming marketspace
In February, we took a small position in Keywords Studios – a leading provider of technical services to the video gaming industry, after the proliferation of the platform game Fortnite and a moratorium on new games in China had weakened market expectations for the group.
The stock had been on our watchlist for some time and we felt that the shares had been oversold given management’s guidance on the burgeoning opportunity in the wider gaming market.
The share price recovered strongly following the release of full year results in April when the company announced that 2018 pre-tax profit nearly doubled as acquisitions boosted revenue. With the share price returning to recent highs in June we decided to sell the holding and realise a gain of 66.6%.
Churchill China – a testament to British manufacturing
We began the year buoyed by the early good news that most stocks in our portfolio registered a gain in January, but none performed better than British manufacturer Churchill China with a 30% advance, thanks to a positive trading statement being published.
Later in the year, Churchill China hiked its dividend 18% after revealing a full year pre-tax profits increase of 13% and revenues up 7%. A switch in focus towards its hospitality and export sales has helped improve margins.
This demonstrates not only a willingness for the company to be opportunistic but also how Churchill China is thriving whilst competitors are not. Again, this runs counter to the prevailing stories we hear about British manufacturing.
Eddie Stobart – the benefit of diversity
An accounting scandal hit one of our positions –Eddie Stobart Logistics. This culminated in the CEO standing down whilst the extent of the irregularities were quantified.
Shares in Eddie Stobart were suspended on 23rd August following the of announcement of accounting problems and the failure to release its interim report. At the time of the suspension Eddie Stobart constituted only 1.0% of the portfolio and so the effect of this is minimised.
This showcases how a diversified portfolio effectively mitigated an individual stock’s performance due to sudden irregularities.
Telford Homes – constantly redeploying our assets
Not all strong price movements are driven by specific news. Affordable housing developer Telford Homes had to shoulder a pretty poor fourth quarter in 2018 as confidence drained from the market for housebuilders. January marked a clear reversal with the stock 17% ahead on no additional news from the company but evidence of a change in investor sentiment.
During the autumn, the takeover of Telford Homes received less fanfare in the press but has been short-term beneficial to us. However, as we prefer to remain fully invested, we looked to re-deploy our investment into YouGov; the most quoted market research source in this country.
Given the focus on opinion polling ahead of the General Election, this highlights the benefit of collaborating with experienced and forward-thinking portfolio managers that we partner with.
How to invest
Investors should note that past performance is not a reliable indicator of future performance and investors should not rely upon past performance when considering whether or not to invest in the Stellar ESP AiM Portfolio Service.