Diversification P 1.

Not all doom ‘n’ gloom

They say a picture paints a thousand words and there is indeed nothing better than a price chart to show the many attractive opportunities 2015 presented in terms of share price moves. Have a look at a UK Index chart. It wasn’t all. A terrific journey was to be had along the way if you looked a little further and considered other options.

While the UK Index did indeed fall by 5%, don’t forget it is an index of 100 stocks. And one thing is for sure, they didn’t all fall 5% last year. For sure, some fell a lot more, widely talked about in myriad annual media roundups over the festive period. But what about the stocks that fared rather better, in some cases posting impressive gains of up to 45%? Who’s taking about them?

Did you know?

Certain housebuilders rose 30 to 40% thanks to government stimulus programmes and the prospect of low UK interest rates for longer. What about insurers whose share prices rallied 20 to 30% thanks to solid growth and continually generous dividend policies? Travel stocks climbed 25-30% on low oil prices.

Nearly all media focus has been on falling commodity prices and the knock-on for the Oil and Mining sector. Because this is what weighs most heavily in the UK Index , or used to be at least. But there’s lots going on elsewhere.

The usual suspects

Digging deeper into the statistics we note that since the beginning of 2015, and including the first few days of the new year, UK Index declines of 650pts can be 90% attributed to just 25% of its components. And it is no surprise to see this small group dominated two thirds (16 stocks) by Oil, Financials and Mining stocks. And the remainder can, in the main, be attributed to multiple and persistent profits warnings and well-documented troubles.

Our point is that casting the net wider and considering other less well-known names can be highly beneficial to both the short-term trader and longer-term investor. And diversifying can also include trading shares short – if something is trending south, maybe there are profits to be made from further falls.

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research

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