Risk on

We're almost done with the first month of 2012, and some distinct patterns are emerging. The Footsie is up 2.9%. Nearly all of the good stuff is down: Brit Amer Tobacco, Morrisons, Tesco, Unilever and Vodafone. Astrazeneca managed to rise - although it's so lowly rated, one wonders how much lower it could go anyway. Diploma and Domino Printing Sciences, which I consider to be good quality companies, have also done very respectably. Maybe because they're not blue chips they've been less influenced by changes in mass psychology. Domino's egg-printing activities has been attracting some excitement (eggcitement? - d'oh) lately, although it's not exactly new news.

Some of the riskier stuff has been flying, though ... Resources in general have been doing well: BHP Billiton up 16%, and one that I've been touting a lot - Afferro - up a honking 44%. Retailers are doing OK - JD up 15%, for example. Financials have been zooming along: Lloyds up 25%, and my somewhat obscure ICP (Intermediate Capital) is up 23%. ICP recently sold patent management company CPA Global, which will generate total proceeds of £387m for ICP. It will receive total cash of £113m, and result in a £43m capital gain for the company. ICP is on a price to free cashflow of 3.4, their distressed debt idea is still looking good to go, so hopefully investors should do well out of all this.

My worst performing share this year is MRW (Morrisons), down 10%. Tesco taking a dive certainly "helped" on that score. Mid-double digit growth is expected on MRW in 2012. It is on a PER of 11.5 - not quite a decade low for the company, but pretty close. The median PER over the last decade was 15.2. So I'm happy enough about holding on to MRW.

2012 is very much a "work in progress", of course. It seems to be conforming to a general pattern I have observed - or think I have observed - over the last few years. Things go great in the beginning, but hit a snag sometime in Q1. Then it's down we go, with all the risky stuff taking a major tumble. So there's everything still to play for. We're also seeing that it's sectors, not shares, that are dominating investor returns.

I'm about 40% quality/defensives, and 60% 'risky' companies. I don't claim this to be an optimal mix, as it's more historical accident than planned exposure, although maybe it on reflection it looks  quite good from a risk/reward point-of-view.