The Stock in Focus (SIF) portfolio fantasy fund isn’t a vehicle for special situation investing or arbitrage opportunities. As regular readers will know, my stock selections are governed by the results of the SIF screen and some simple rules for diversification.
But this doesn’t mean there isn’t room for me to select stocks for the portfolio based on my perception of future opportunity. As long as the company concerned satisfies all of my rules, then the remit for this fund allows me to add some discretionary choices into the mix.
An interesting possibility?
Most of the stocks which qualify for my screen at the moment are either already in the portfolio or are duplicates. For example, housebuilder Crest Nicholson is too close to Redrow to consider buying both.
One of the few stocks that is eligible for purchase is insurance and asset management group Standard Life. Although the portfolio doesn’t contain many big cap stocks, there isn’t a rule against it. Indeed, I believe there’s some value in adding a few stable, income-generating big caps into the mix.
Doesn’t Standard Life duplicate Miton? Leaving aside the difference in size, this is a valid question. Small cap fund manager Miton has been a successful investment for the SIF Portfolio so far. It’s risen by 33% during the five months it’s spent in the portfolio.
Although there is some overlap, I’m prepared to consider Standard Life for two reasons. The first is the group’s life insurance and savings business, which Miton doesn’t have.
The second reason is that Standard Life is expected to merge with emerging markets-focused group Aberdeen Asset Management this summer. The combined group will be known as Standard Life Aberdeen.
Why I’m interested: Aberdeen doesn’t qualify for the SIF Portfolio, thanks to last year’s profit slump and its poor share price performance over the last two years. But Aberdeen’s StockRank of 95 is significantly more impressive than Standard Life’s figure of 61.
The proposed merger seems to have attracted a fairly lukewarm response from investors. However, I think Standard Life could benefit from what appears to be the start of a recovery at Aberdeen Asset Management.
Broker forecasts for Aberdeen have risen steadily this year. These have…
