Monthly Style Summary to End January 2012

Friday 3rd February, 2012

Markets shrugged off continuing European financial concerns and widespread risks of an economic “double dip” in major economies and, with little more that scattered house sales statistics as support, moved strongly, and broadly, higher. As Momentum abruptly reversed, Value stocks extended last month’s gains and, almost paradoxically, Higher Dividend securities noticeably underperformed, and this wasn’t just due to relative underperformance of Utilities.

The 3 month Style Map and the 1 month Style Map clearly identify the recent turn to Value, and signs usually associated with emerging optimism. Exporters are outperforming domestically focused companies, High Beta stocks are gaining and, over the most recent month, Highly Geared companies are also, finally, recovering. Further, in the context of the recent dividend “bubble”, the underperformance of High Dividend securities can be seen as investors no longer anxiously seeking the comfort of high dividend stocks but now risking potentially more attractive investments in other undervalued securities. Whether this heralds the beginning of a profits revival, further market gains and a Value resurgence or is simply a case of a “down so long it looks like up to me” interpretation of a few economic statistics, it is healthy to see Value valuations coming back into line.