Summer Portfolio winners revealed

Summer is typically more pedestrian in terms of share price performance. However, after extensive research, Money Observer's sister website Interactive Investor has uncovered two seasonal portfolios which have significantly outperformed the wider market over the summer months for the past decade.

Now we can reveal the constituents of both portfolios and the rationale behind their inclusion.

Like our hugely successful Winter Portfolios, the summer version is incredibly simple. All it requires is that investors buy a portfolio of stocks on Friday 1 May and sell it on Friday 30 October.

The beauty here is that investors are guided by both a defined entry and an exit point, which takes the stress out of trying to time the market.

THE PORTFOLIOS

As before, we screened the FTSE 350 for those stocks with the most consistent gains over the six-month period for the past 10 years. To keep our portfolios manageable, we picked the top five. Our other basket of shares is more aggressive, including companies boasting a slightly shorter track record, but with even higher potential returns.

Data compiled by Harriman House, publisher of The UK Stock Market Almanac, reveals that the FTSE 350 has risen by an average of just 0.3 per cent a year for the past decade.

However, rather than accept these measly returns we teamed up with Almanac author Stephen Eckett to build a pair of seasonal portfolios able to thrash the wider market.

First, we took the companies which had delivered the most positive annual returns over the past 10 years, then picked the best five performers from that list.

The result is an Interactive Investor Consistent Summer Portfolio - our Summer Smoothie - which has averaged annual growth of 8.9 per cent since 2005.

Interactive Investor's Consistent Summer Portfolio
CompanyTickerActivityTrack record (years)Positive returns (years)Avg return (%)
Dechra PharmaceuticalsDPHPet pharmaceuticals10911
DiageoDGEDrinks maker1096
National GridNG.Power transmission network1094
PZ CussonsPZCConsumer goods supplier10813
ShireSHPDrugs manufacturer10810

What's more, the portfolio has lost money just once in the past decade - in 2008 - but even then it beat the FTSE 350 by 19 per cent. The benchmark has actually fallen in three summers out of the past 10.

By fine-tuning our selection process, we found that we could build a portfolio with a history of much greater returns. Of course, with greater potential returns comes extra risk, hence the naming of our Aggressive Summer Portfolio - the Summer Sizzler.

Interactive Investor's Aggressive Summer Portfolio
CompanyTickerActivityTrack record (years)Positive returns (years)Avg return (%)
Aveva GroupAVVEngineering design software10716
Entertainment OneETOFilm and TV distribution8629
Micro Focus InternationalMCROSoftware and IT9715
BTGBTGSpeciality pharmaceuticals10713
PZ CussonsPZCConsumer goods supplier10813

To do so, we had to relax our entry criteria very slightly. To maintain credibility, however, we still demanded a minimum of eight years as a FTSE 350 company and 70 per cent success rate in terms of positive annual returns.

By cherry-picking the best performers, our basket of shares - which includes soap maker PZ Cussons from the Consistent Portfolio - significantly outperformed the benchmark index every year for the past decade, this time by an average of 17 per cent. Again, this portfolio only lost money in 2008.

You can buy the Summer Portfolios through the Interactive Investor website.

Do remember to factor in commisson costs when purchasing model portfolios. Small sums invested will be disproportionately impacted by charges.

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