After the summer washout, investors' eyes turn to autumn
After the spring bounce, summer has been a washout for investors. Those of us who were hoping for a barbecue summer on the bourses have been left staring glumly at cloudy skies.
A Fool and his money
Summer has thoroughly rained on the parade of stocks I picked in late March and early April. BP (LSE: BP), at one point up 17% on what I paid, has slipped to just 4% ahead. HSBC (LSE: HSBA) is down 12%, although I can't say I wasn't warned, while Royal Dutch Shell (LSE: RDSB) is down 9%. Plus I'm still 17% down on Barclays (LSE: BARC).
I've had one or two notable successes. My stake in the Scottish Oriental Smaller Companies (LSE: SST) investment trust is up 14%.
So I am left with two choices. To look back with fond memories of the spring sunshine, or forwards with hope towards autumn, the season of mellow fruitfulness. I prefer to look forwards.
It's a dog's life
As you may have seen, in the recent Duelling Fools, I came out in support of a stock market recovery in the near future.
It's good to remind myself of that now, in the dog days of summer, that the autumn can still look very, very different. The recent slowdown could be a case of stock markets catching their breath after the last 18 stormy months, and gathering themselves for a tentative but ultimately rewarding recovery.
Reasons to be cheerful
There is still some good news out there. Retail sales leapt by a surprising 3.2% in June, according to the British Retail Consortium, as the heatwave boosted sales of bikinis and barbies. So people still have a bit of money left in their pockets.
Property prices are still holding up, while the latest falling consumer price inflation to just 1.8% suggests that interest rates will be staying low for most of the next year, which should help the recovery.
The latest OECD leading indicators show improvements in all member countries, including the UK, while US Treasury Secretary Tim Geithner has added his voice to those claiming the global economy is recovering. Plus the bigger economies have yet to see the full benefit of their various stimulus packages.
The UK has seen precious little impact yet from quantitive easing, but the Bank of England says it could take around nine months to become apparent. That could be nicely timed to boost confidence in the autumn, although Bruce Jackson, my opponent in last week's duel, begs to differ.
Better in than out
The recovery will be a long and rocky road. I would expect stock markets to enjoy a few short, sharp upturns in that time, although nobody knows exactly when they will happen. That's why it's wise to be in the market now, buying quality companies at low valuations, before markets spike upwards, than pile in afterwards, when it's too late.
Plus of course with savings rates likely to stay low into 2010, any company with Big Dividends Going Cheap looks unusually attractive.
Sunny intervals
Actually, I have been overdoing the gloom on my own portfolio. There have been one or two successes, although not among my own big-name picks.
My best buys have come in the under-researched small cap market, where shares typically show greater independence from wider market movements. In late May, I invested in Volvere (LSE: VLE), an opportunistic investor in turnaround situations, following an article from Steve Scott called Double Your Money With These Two Bargains.
It did nothing for six weeks or so, then leapt more than 30% at the start of July, after selling Sira Certification for £8.6 million. Volvere now has £20 million to invest, so I'm hanging on to see if I really can double my money.
Viva Aveva
I'm also up more than 20% on engineering software developer Aveva (LSE: AVV), one of the picks in Maynard Paton's Champion Shares, which he hails as "a quality recovery tip for the long-term".
These are the two bright spots to cheer up the recent overcast days, and they have also confirmed a valuable lesson. You can make money even in a flat or declining market, although you might have to go off the beaten track to do it.
You may also have to be a bit patient, and wait for individual company good news, rather than a wider improvement in market sentiment, to drive your portfolio forwards.
It may be raining while I write this, but I shouldn't forget that have been a few sunny intervals as well. Now I'm hoping the forecast will much brighter in the autumn.
More from Harvey Jones:
> Harvey owns all the shares mentioned in this article.
