From the start of October 2018 until the end of December 2018 the stock markets saw a pretty big sell off. Various concerns over the global economy, China, Trump, the Federal reserve, Brexit all combined with historically high valuations with some of the big tech companies to create a very delicate balancing act for the stock market. It couldn't last and the US stock market rolled over. On 3rd October the S&P 500 was at 2925, by 21st December it was at 2351 a 20% drop. In the UK the FTSE 100 had been under pressure since May 2018 and had been losing ground over 6 months, but followed the S&P lower during the winter, losing 12% from 7510 on 3rd October to a low of 6584 on 27th December.
This was followed by a new year rally that saw the S&P rise 25% from December and the FTSE 12%.
I remember reading and listening to various pundits remarking on the need to sell stocks and move into cash. I didn't, and was wondering what would have happened had I done so. If I had managed to catch that wave would I now be looking at my portfolio that was 12% higher?
I'll take a retrospective look at this using the 3 biggest holdings in my portfolio - Unilever, GlaxoSmithKline and Compass.
Wind back the clock - Unilever
Unilever put in a lot of effort to shoot themselves in the foot in 2018. They have a head office split between Holland and the UK and they had proposed to consolidate this into a single location in Holland. A knock on effect would have meant they would have to delist from the main UK indices, although they could still be traded in the UK, funds holding stocks listed on the main indices, index trackers etc. would have been forced to sell their Unilever shares. This proposal required approval by investors, and there was some disquiet and disagreement between investors, particularly large institutional investors who questioned the logic of the move, and company management. The share price had a bit of a wobble and was probably a little lower than it would otherwise have been as a result. On 3rd October 2018 it stood at 4224p, on 27th December when the FTSE 100 hit it's low point, the Unilever share price was 4080p, 3.5% lower. A month later on 28th January it was 3941p, 6.5% lower than October. It hit similar low points in the middle of October and the end of February. At what points would I have bought and sold?
I probably would have sold at some point in the first couple of weeks in October, as the pessimistic outlook from many commentators started to play out across the markets. I would probably have looked for a nice round number, maybe waiting for the price to reduce by 10%...but it never would have got that far. As noted above a "perfect" trade would have resulted in a 6.5% increase.
But I would have incurred commission on the purchase, plus tax, and if I had not held the stock on the ex-dividend date of 1st November, I would have missed the quarterly dividend payout too.
I could have got that 10% by selling at the end of August and buying back in at the bottom of one of the dips during the winter. Whilst the FTSE was sliding, and did so from around May to December, Unilever wasn't following suit. It see-sawed through the summer and autumn, and had a 2 month mini-rally all of it's own from mid-October to mid-December.
Wind back the clock - Compass
Compass seems to be a particularly pedestrian and uneventful investment, it just seems to plod slowly onwards. Perfect. However, it got a wriggle on during the autumn sell off, it was at 1709p on 2nd October, and dropped 13% to 1483p 20 days later. But if you'd been sluggish you would have missed it, as by the 21st November it was back to 1697p. After which it meandered until the end of January when it decided to wander upwards.
I could have grabbed a 10% bounce, and could have avoided ex-dividend cut offs, but I would have had to have been quick. I would also have been moving against all of the indicators that would have caused me to sell in the first place, as the FTSE continued to drop whilst Compass turned upwards.
Wind back the clock - GlaxoSmithKline
The GSK share price has been more volatile than either Unilever or Compass, and has looked less than nimble as it has tried to turn itself back into a business making a decent profit. The share price probably reflected a busy year during which GSK got a break from delays in competitors bringing generic versions of it's Advair product to market, offloaded Horlicks, got into bed with Pfizer, and started the process of splitting it's business into a couple of logical chunks.
During the market doom and gloom, on 3rd October, GSK stood at 1554p, had dropped to 1429p by the 12th October - an 8% wobble. But a week later, by the 19th October the price was back where it started. It's biggest move over the winter was a 12% drop from 1621p on the 30th November, to 1418p on the 6th December.
Like Unilever and Compass, GSK isn't neatly aligned to the wider FTSE movements during this sell off. There are clear periods of the price increasing and the index continues to sell off. As with Unilever, the quarterly dividends paid by GSK mean that there was an ex-dividend date during this sell off - 15th November, so jumping in and out of the stock might have required navigating that date too. But there were clearly periods when some cunning market timing would have been profitable.
Conclusion
There are some obvious opportunities to make some extra profit it I could time these jumps into and out stocks. And in answer to my earlier question about making an extra 12%, it was probably possible, at least for some of my holdings.
But it seems like terribly hard work to get it right. I think I'd rather be lazy, at least until I have more time on my hands to keep a beady eye on the markets. I enjoy reading about the economy and listening to pundits pronounce on the next amazing/ awful move from the markets, but it doesn't really excite me. I have a 20 year timeframe in mind for these investments, and whilst I intend to keep a watch on them, I shan't be doing so every day.
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