Helped by a positive first quarter for stocks our top selections for 2023 have made a superb start to the year.

At the time of writing the share price return on the portfolio of 10 names is 18.5%, substantially outpacing the FTSE All-Share which is up just 3.8% and with not a single name in negative territory. We have also significantly outperformed the MSCI World’s 4.6% advance in sterling.

The key drivers behind our success have been a combination of being exposed to the right areas of the market and individual stock-specific catalysts.

Recognising the risks of a deterioration in sentiment over the remainder of the year we moved quickly to book profit on three of our selections during the first quarter.

WHERE AND WHY DID WE TAKE PROFIT?

The three top spots in our table ranking the 2023 picks’ performance are occupied by names where we chose to make a sharp exit.

At the top is sports retailer JD Sports (JD.) which posted a bullish post-Christmas trading update on 11 January where it guided for full-year profit at the top end of the £933 million and £985 million forecast range.

A 40% return in less than a month on a consumer-facing stock in a cost-of-living crisis made a strong case for getting out while the going was good.

We did well to take advantage of a positive early reaction to returning CEO Bob Iger’s plans to revive the fortunes of global entertainment leader Walt Disney (DIS:NYSE). Earnings for the three months to 31 December were 27% ahead of expectations at $0.99 and Iger signalled plans to pay a dividend before the end of 2023. The shares have subsequently drifted back since we took profit in February as the market awaits further progress with the recovery plan.

African gold miner Shanta Gold (SHG:AIM) was boosted by a spike in gold prices linked to the collapse of Silicon Valley Bank and the ensuing banking crisis. With some concern about operational risks at the business after production missed guidance in the fourth quarter, it felt an opportune time to take our money off the table, which we did in March.

WHAT ELSE HAS DONE WELL?

Improved sentiment towards technology names, as concerns about financial stability have brought down interest rate expectations, have been helpful to Apple (AAPL:NASDAQ) and chip equipment maker ASML (ASML:AMS). In January Netherlands-based ASML announced a 37% increase in fourth quarter net system sales to €4.75 billion with services revenue up 10.5% to €1.68 billion.

The fourth quarter gross margin was better than expected at 51.5% and the company guided for 25% sales growth in 2023.

Apple shares are approaching a new record high as investors flock back to profitable technology companies. The market also brushed off a rare miss on forecasts with Apple’s first quarter earnings running to 31 December.

Earnings per share of $1.88 on sales of $117.2 billion represented a three to four percentage point miss. This was the first time since October 2021 that Apple had fallen short on sales, and it was the worst revenue performance since the September 2016 quarter.

However, reassuring noises on supply chain issues, a strong showing for its services business and returning demand from Asia have helped ease any investor concerns.

TWO UK MID-CAPS SHINE

A pair of UK mid-caps in the portfolio, ME Group (MEGP) and Premier Foods (PFD), have delivered impressive returns.

Formerly known as Photo-Me, photo-booth and laundry operator ME Group reported double-digit increases in revenue and profit for 2022 and raised the total dividend paid for the year from 2.89p to 12.1p (factoring in a 6.5p special dividend). The company said it expected pre-tax profit of between £61 million and £65 million for 2023 – ahead of previous consensus forecasts.

Maker of Mr Kipling cakes and Bisto gravy, Premier Foods continues to enjoy positive trading momentum. The company recently said pre-tax profit would be ahead of the previously guided £135 million for the 12 months to 31 March.

WHAT HASN’T DONE AS WELL?

Catering giant Compass (CPG) and Asia-focused insurer Prudential (PRU) may not have shot the lights out but have offered solid performance.

Prudential’s shares rallied at the start of the year on hopes that business would improve in China following a relaxation of Covid rules. However, they slipped back in February as sentiment soured towards the financial sector and as concern built around unrealised losses in its bond portfolio (something which has hit its peers too). This overshadowed a decent set of results on 15 March. The shares have subsequently started to recover.

Pharmaceutical outfit GSK (GSK) is the only notable underperformer versus the FTSE All-Share with a 2.2% gain. The market is perhaps waiting to see the outcome from litigation in the US alleging its heartburn drug Zantac causes cancer. Early signs from legal cases have pointed towards a positive result for GSK.

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