Companies and their investment bank advisers need to have a serious rethink about the way they bring companies to the market otherwise the supply of funds and willing investors will dry up.

Glencore has just joined an ignominious list of companies coming to the market and then seeing their share prices take a tumble and this is not good news for the reputation of the UK market as a whole.

If you look at the chart below it shows the performance achieved from investing in IPOs (white line) against that of the overall UK market (yellow line). What we can see is that there has been a major disconnect since the market bottomed early in 2009.

Companies and their advisers are simply being too greedy.  The situation is also not helped by too many parties being involved in most IPOs which is making meaningful discussion with managements and, in turn, our own valuation assessments increasingly difficult.  So unless valuations become more appropriate I’m not interested, which is a shame because we do want new opportunities and new blood coming in to the market as they are one of the things that make us get up in the morning.

Focusing in quality
Against the current economic back-drop I’m focusing on quality.  Last week I added contract caterer Compass to the portfolio after a good meeting with the company, which has given me increased confidence in its outlook as their model is now being successfully rolled out in Brazil as well as the UK & US.

Don’t ignore the retailers
It’s true that the UK retail sector is having a difficult time. But that doesn’t mean it should be ignored, especially when your focus is on cashflow. The market can often take too pessimistic a view on companies. A recent good example was Kingfisher, where it ignored strong actual cashflow focusing too much on market sentiment and the bigger picture.  This provided a good trading opportunity, which we exited at a profit last week.

Stock selection remains key
Elsewhere in the portfolio I remain neutral on resources overall but continue to focus on Rio Tinto, Xstrata and Zanaga Iron Ore. As regards the banks, the recent comments from the Chancellor do not make them any more attractive in the short term - but never say never and I remain overweight Standard Chartered a long time favoured position.